Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329311 
Year of Publication: 
2025
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 13 [Issue:] 2 [Article No.:] 31 [Year:] 2025 [Pages:] 1-18
Publisher: 
MDPI, Basel
Abstract: 
Examining the economies of the European Union from 2000 to 2023, we have found no strong evidence that the inflation rate has a negative impact on economic growth. In contrast, in line with conventional economic theory, higher interest rates are associated with lower economic growth. The results remain consistent even after controlling for various control variables, non-linearities and endogeneity issues. These findings suggest that an aggressive tightening of monetary policy in the euro area, aimed at rapidly bringing inflation under control, could actually be detrimental to economic growth. Since the negative effects of monetary tightening on growth are clear, while the benefits of rapidly reducing inflation on economic growth are ambiguous, the European Central Bank must be cautious about both the intensity and the duration of monetary tightening.
Subjects: 
economic growth
inflation
inflation volatility
interest rates
European Union
panel data
JEL: 
E31
E40
E52
E58
O40
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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