F41 - Open Economy MacroeconomicsReturn

The article analyses inflow of foreign direct investment into the Czech Republic. It describes the development in recent years and analyses the influencing factors. Foreign direct investments are a very important financial source in the Czech economy and therefore much attention is paid to the factors which attract the inflow of foreign long-term and non-debt capital. It is important especially for investors during their decision making process of expanding the business abroad. Among others, the most important lures are openness of the country, low labour cost, the exchange rate policy and the overall risk of the country.

The paper deals with an actual issue of the Euro adoption in the Central and Eastern European countries. The main goal is to assess the preparedness of candidate European countries to adopt the Euro from a perspective of the theory of Optimum Currency Areas (OCA). The measure of dynamic similarity of business cycles of selected Central and Eastern European countries (CEE), Baltic countries and the Eurozone was applied in the analysis. This measure indicates dynamic convergence trends of the CEE and Baltics towards the Eurozone. Business cycle correlation belongs to characteristics listed within a frame of the New Theory of Optimum Currency Areas approach. Particularly, the rolling window correlation of Gross Domestic Product and Industrial Production time series were applied to asses the dynamic moments in the evolution of similarity in business cycles of the analysed European candidate countries and the Eurozone. The results shed some light on continuing convergence process in Baltic, CEE countries and Eurozone. A possible impact of a beginning of the global financial crisis on the business cycle correlation results are also discussed in the text.