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Economic Freedom and Economic Performance: Does Good Governance Matter? The Case of APAC and OECD Countries

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  • Emara, Noha
  • Reyes, Loreto

Abstract

Economic freedom is an important determinant of economic growth and income distribution, which are key factors in facilitating economic development. The paper empirically investigates the relationship between economic freedom and economic performance in the APAC and OECD countries. A panel model with fixed effects technique is employed on yearly data for the period 1980-2017, using a number of measures of economic freedom covering the size of government, property rights, monetary policy, access to international trade, and regulation of credit labor, and businesses. The study also investigates the role of governance in affecting the impact of economic freedom on economic performance. The results of the study indicate that economic freedom positively affects economic performance in the selected countries after controlling for country-and time- fixed-effects. Additionally, the study finds that this positive impact is higher for the APAC than for the OECD countries. For APAC countries, a country’s size of government, expansionary monetary policy, and less regulation has a positive and statistically significant impact on its output per worker. Finally, the study finds that governance is a pre-condition for economic freedom, where the impact of economic freedom on economic performance is amplified by about five folds in the presence of better governance including the freedom of a country’s citizens in selecting governments and expressing their political views, political stability, enhanced quality of public services, and control of corruption.

Suggested Citation

  • Emara, Noha & Reyes, Loreto, 2020. "Economic Freedom and Economic Performance: Does Good Governance Matter? The Case of APAC and OECD Countries," MPRA Paper 103590, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:103590
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    Cited by:

    1. Gibogwe, Vincent & Nigo, Ayine & Kufuor, Karen, 2022. "Institutional Quality And Economic Growth In Tanzania," MPRA Paper 115400, University Library of Munich, Germany.
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    3. Gibogwe, Vincent & Nigo, Ayine R.S. & Kufuor, Karen, 2022. "Institutional Quality and Economic Growth in Tanzania," MPRA Paper 115486, University Library of Munich, Germany, revised 28 Nov 2022.
    4. Victor Shevchuk & Roman Kopych, 2021. "Exchange Rate Volatility, Currency Misalignment, and Risk of Recession in the Central and Eastern European Countries," Risks, MDPI, vol. 9(5), pages 1-19, May.

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    More about this item

    Keywords

    APAC; OECD; Economic Freedom; Panel Models; Governance;
    All these keywords.

    JEL classification:

    • N2 - Economic History - - Financial Markets and Institutions
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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