This research studies the causal relationship between gross domestic product (GDP), foreign direct investment (FDI), and energy consumption in Germany and the United Kingdom for a period of 1971-2010. The empirical results reveal that there is a unidirectional causality running from GDP to energy consumption and from GDP running to FDI in Germany. The conservative energy policy is recommended to support the energy saving because it will have little or no adverse effect on GDP. Also, the public expenditure should be expanded to increase the country’s economy and attract foreign investors. For the United Kingdom, the results find a bidirectional causality running between FDI and GDP. The government should offer the low corporate tax and individual income tax to foreigners to attract their investments. Also, the free trade area or the financial subsidies should be provided for foreign investors as an incentive. Moreover, it is advised to impose the low tax policy or tax credit offering to the corporate and individual foreign investors. Also, there is a unidirectional causality running from energy consumption to GDP and from energy consumption to FDI. The growth hypothesis is supported and energy efficiency policy is suggested for the United Kingdom as energy has the important role for economic growth.
