The flows of foreign investment are the fundamental elements in the economic growth of countries within the globalization process of economy. Canada has a highly-developed economy, advanced technological infrastructure that will allow them to attract flows of FDI. This study makes an attempt to test the possible directions of causality between exchange rate and flows of foreign direct investment in Canada for the period of 1970 to 2015. The methods applied are the error corrections and variance decompositions techniques including LRSM. To the best of my knowledge, there has not been any study on this issue using this technique. Our findings on this study suggests that the direction of causation between FDI and exchange rate as expected ...