Market economies are not developing smoothly, they succumb to permanent fluctuations of economic activity. Effort of macro-policies is to mitigate or eliminate these fluctuations and support long-term economic growth. Therefore, the aim of this thesis is to analyse the influence of economic policy on causes, course and impact of cyclical development in the Czech Republic in the years 1989-2009. The first section will outline the theoretical background of the economic cycle. I will explain the essence, causes, methodological basis of the business cycle and describe a set of indicators that will help me to analyse fluctuations of economical activity in the practical part. In theoretical part I will also focus on economic policy, especially on the macroeconomic area, but the microeconomical area will be also mentioned. In practical part I will study economic development of the Czech Republic in last twenty years, using the indicators described in the theoretical part. I will evaluate the way of setting the economic policy (suitability of policy mix) in certain economic situations and answer the main question of this thesis: what was the influence of economic policy on economic development of the Czech Republic? Last chapter will be devoted to the business cycle forecasts. I will compare methodical approaches used by forecasting centres such as Ministry of Finance, Czech National Bank and OECD. I will analyse how the previous forecasts of these institutions varied from reality and finally perform a forecast of economic development in the Czech Republic.