Investment incentives as instrument of motivation of firms and economic stabilization

Abstract

Investment incentives are mostly presented as an efficient tool of economic policy to eliminate negative impacts of economic cycle and also as the tools of motivation of firms to generation of investment. The aim of the paper is to verify the relationship between investment incentives and business cycle in the Czech Republic. There is used the data of CzechInvest, Czech Statistical Office and Organisation for Economic Cooperation and Development. To verify the link between the investment incentives and the business cycle, the Pearson correlation coefficient and Spearman correlation coefficient was used. There has been identified moderate positive relationship between the volume of the state support and the growth of the gross domestic product in constant prices. The link between investment incentives and output gap was not statistically significant. The study brings new insights on the field of investment incentives as an instrument of stabilization of economy. Investment incentives are important in terms of stimulating the investment activity of firms. Findings of the study answer the question of whether the government behaves responsibly in the area of investment incentives. The findings show that the policy of investment incentives does not respond flexibly to the current needs of the Czech economy.