THE ROLE OF POLITICAL AND INSTITUTIONAL FACTORS ON ECONOMIC FREEDOM: EMPIRICAL EVIDENCE FROM PMG ARDL MODEL ESTIMATION

Year 2022, Volume: 6 Issue: 1, 83 - 94, 30.03.2022

Bünyamin Fuat Yıldız

Abstract

This study focuses on investigating the political and institutional factors that impact economic freedom. The factors addressed for the study are those that have resulted in disputed outcomes in prior works— but have not been evaluated holistically. Using annual data collected from 2003 to 2017, a panel ARDL technique was performed for 17 nations to examine both the short-run and long-run impact of political and institutional factors. The results of the study suggest that government effectiveness and political stability have a favorable impact on economic freedom, but government size is not. Furthermore, the study shows that corruption has a detrimental impact on economic freedom. The most likely answer is that corruption is not grease for the economic system’s wheels. Surprisingly, the findings suggest that democracy has a negative influence on economic freedom. Hence, as a policy implication, there is a necessity to improve institutions’ effectiveness, reduce government size and provide political stability to construct economic freedom on economies.

Keywords

Economic Freedom, Corruption, Government Size, Political Stability, Democracy

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