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Re-Exploring the Nexus Between Economic Freedom and Growth: Is There a Threshold Effect?

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  • Gouider, Abdessalem

    (Imam Mohammad Ibn Saud Islamic University, Saudi Arabia and Gabes University, Tunisia)

  • Nouira, Ridha

    (ISFF and LAMIDED Sousse University, Tunisia)

  • Saafi, Sami

    (FSEG Mahdia, Monastir University and LAMIDED Sousse University, Tunisia)

Abstract

This study aims to assess the nonlinear effect of economic freedom on economic growth using a sample of 35 emerging and developing countries over the period 1996-2018. To this end, the threshold regression approach of Hansen (1999, 2000) has been deployed. The panel threshold analysis provides evidence of significant nonlinear relationship between economic freedom and economic growth. The tipping point of economic freedom is around 49.87 for the entire sample. Moreover, our findings prove that the estimated threshold level of economic freedom index in emerging countries (64.097) is significantly higher compared to that of developing countries (48.59). Looking at individual country results, the presence of nonlinear threshold effects of economic freedom on economic growth was confirmed in nineteen out of the thirty-five models. The estimated threshold values are quite heterogeneous, ranging from 35.16 in Zimbabwe to 75.87 in Chile.

Suggested Citation

  • Gouider, Abdessalem & Nouira, Ridha & Saafi, Sami, 2022. "Re-Exploring the Nexus Between Economic Freedom and Growth: Is There a Threshold Effect?," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(3), pages 147-167, September.
    • Handle: RePEc:ris:jecdev:0014
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    More about this item

    Keywords

    Economic Freedom; Growth; Panel Threshold Model;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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