Investigating the Impact of COVID-19 Policy Decisions on Economic Growth: Evidence from EU Countries

In this chapter, we examine the link between the policy responses to the COVID-19 outbreak and economic growth. Using three key response variables namely containment and health index, overall government response index, and economic support and a sample of 27 EU countries from 2007q1 to 2022q1, we bring strong empirical evidence that the economic recovery was linked to the intensity of the government response. More to the point, the estimates reveal that the higher intensity of support measures, regardless of their type, is leading to an improvement on economic growth and its components in the next quarter. Furthermore, the impact on economic growth is higher when the government increases the intensity of containment and health measures compared to economic measures.