Monetary freedom and economic growth in New European Union Member States

Abstract

This paper analyses the relationship between monetary freedom (index measured by the Heritage Foundation) and real economic growth of 11 new member states of the European Union. 19-year panel data regression with fixed effects over the period of 1997– 2015 reveals that the real GDP growth of the selected countries is positively affected by the degree of monetary freedom. However, the relationship between monetary freedom and real GDP growth has weakened after the global recession of 2008. Monetary freedom was not jeopardized during the crisis, while real GDP growth declined significantly in most of economies studied.