Loans, Inflation, and Economic Growth in Türkiye and the European Union: A Comparative Analysis of Macroeconomic Dynamics

In recent years, policies implemented to ensure economic stability have undergone significant changes in response to global and regional developments. In particular, the effects of the COVID-19 pandemic and the economic uncertainties caused by the ongoing Russia-Ukraine war have led to the widespread adoption of expansionary monetary policies. Accordingly, the European Central Bank (ECB) and the Central Bank of the Republic of Turkey (CBRT) tried to maintain economic stability by providing liquidity to the markets, but these policies, combined with increases in energy and commodity prices, led to a significant rise in inflation rates in Europe and Turkey. This study aims to analyze the impact of bank lending to the private sector and inflation on economic growth in Turkey and the European Union over the period 2001-2023 using the ARDL bounds test method. Adopting a comparative approach, GDP per capita employment, net exports and foreign direct investment are included in the model as control variables in order to evaluate the effects of financial intermediation and price stability on growth under different economic conditions more comprehensively. The findings show that credit volume, inflation and GDP per capita employment have a positive effect on economic growth in Turkey, whereas net exports have a negative effect on growth and FDI has no statistically significant effect. In the analysis for the European Union economy, it is found that GDP per capita employment and foreign direct investments contribute positively to economic growth, whereas credit volume and net exports affect growth negatively. Moreover, inflation has no statistically significant effect on economic growth in the European Union.