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Economic Freedom And Economic Well-Being: A Granger Causality Analysis Of 49 Countries, 1995–2004

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  • Hakan SARIBAS

Abstract

Most studies show that nations which have fewer restrictions on private agents and transactions tend to have higher levels of economic growth. However, it is less clear which of the disaggregated categories of economic freedom determine growth and whether or not growth granger causes economic freedom. The aim of this paper is to address the issue concerning the direction of causation between measures of economic freedom and economic growth. We employ a panel of countries from the Heritage Foundation data set and conclude that economic well-being granger causes the average level of freedom as well as some underlying components of economic freedom.

Suggested Citation

  • Hakan SARIBAS, 2010. "Economic Freedom And Economic Well-Being: A Granger Causality Analysis Of 49 Countries, 1995–2004," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).
  • Handle: RePEc:eaa:aeinde:v:10:y:2010:i:2_4
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    References listed on IDEAS

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    1. Sadequl Islam, 1996. "Economic freedom, per capita income and economic growth," Applied Economics Letters, Taylor & Francis Journals, vol. 3(9), pages 595-597.
    2. Carlsson, Fredrik & Lundstrom, Susanna, 2002. "Economic Freedom and Growth: Decomposing the Effects," Public Choice, Springer, vol. 112(3-4), pages 335-344, September.
    3. North, Douglass C., 1989. "Institutions and economic growth: An historical introduction," World Development, Elsevier, vol. 17(9), pages 1319-1332, September.
    4. Jac C. Heckelman, 2000. "Economic Freedom and Economic Growth: A Short-run Causal Investigation," Journal of Applied Economics, Universidad del CEMA, vol. 3, pages 71-91, May.
    5. Niclas Berggren & Henrik Jordahl, 2005. "Does free trade really reduce growth? Further testing using the economic freedom index," Public Choice, Springer, vol. 122(1), pages 99-114, January.
    6. Justesen, Mogens K., 2008. "The effect of economic freedom on growth revisited: New evidence on causality from a panel of countries 1970-1999," European Journal of Political Economy, Elsevier, vol. 24(3), pages 642-660, September.
    7. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    8. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
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    Cited by:

    1. Webster, A.L., 2013. "Is There Feed-Back Between Economic Freedom and Economic Growth: A Comparative Granger-Causality Test Based On Quartiles," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 11-24.

    More about this item

    Keywords

    Economic Freedom; Economic Growth; Panel Data; Granger Causality;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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