Does Really Economic Freedom Matter for Growth in South Asia? Empirical Evidences from Pre-Economic Crises and Post-Economic Crises Period

Abstract

The discussion about the relationship between economic freedom and economic growth is not new and has always been extensively discussed in economic literature. But the question in this area is the consideration of the effects of global financial crises of 2008. This study attempts to answer the question: How does economic crises effect freedomgrowth nexus? This study analyses the relationship between economic freedom index (measured by Fraser Institute), individual components of economic freedom and GDP per capita growth of 5 South Asian countries over the period of 1990-2015. Fixed effects regression results reveals that GDP per capita growth is positively affected by economic freedom index and this relationship has weakened by the global economic crises of 2008. It does not mean that increasing economic freedom is good for economic growth since one of the components of economic freedom has negative effect on growth. Contribution/ Originality: This study contributes in existing literature by checking the role of economic freedom and its individual components for economic growth of South Asia without considering the role of global economic crises of 2008 and then adds up the post crises period into analysis. The results of Fixed effects test on two different models shows that global economic crises severely deteriorates the impact of economic freedom and one of its components (monetary freedom) tends with negative impact on economic growth on selected countries. 1. INTRODUCTION South Asia is the fastest growing region in the world with average GDP growth 5-7 percent since during last two decades and it is projected with 7.1 percent by 2018. After global financial crises of 2008 several decisions were made by South Asian Association for Regional Cooperation (SAARC) countries in its summit of 2010. Secretary General Fathimath Saeed stated that under the theme of "Building Bridges" and more liberalization among member countries would be source of closing of space between intent and implementation of regional policies. President Mohamed Nasheed, chairperson of 17 th SAARC summit also addressed areas of cooperation in which there is need of intense progress should take place, such as trade liberalization, more economic integration and integrity within and among member states.

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“…These findings are in line with the study of Bjornskov et al (2010) and they argued that the societies with high income usually appreciate and endorse the decisions and values of judicial and democratic institutions without considering their material well-being. The coefficient of Sound Money is negatively significant in both lower-middle-income and middle-income countries which mean that citizens of countries value the access to sound money and these results are in line with Nadeem et al (2019) where they argued that monetary freedom has a negative impact on growth and social welfare in the cross country analysis. For the high-income countries, the coefficient is unexpectedly positively significant and the findings are in support of the argument that in high-income countries, citizens don't care about money growth or inflation (Gehring 2013).…”

The relationship between economic freedom and growth: Evidence from the Next Eleven (N-11) countries

“…Using the Heritage Foundation's index of economic freedom and applying the panel threshold approach,Gouider et al (2022) studied the relationship between economic freedom and growth for 35 emerging and developing countries from 1996 to 2018. They found evidence of a non -linear relationship and a differential threshold level of economic freedom in emerging and developing economies Nadeem, Yang, Akhtar, Dong, and Niazi (2019). found a positive association between economic freedom and growth in five South Asian countries from 1990 to 2015.…”

Exploring the Relationship of Variant Degrees of National Economic Freedom to the Ethical Profiles of Millennial Business Students in Eight Countries

“…Using a sample covering 160 countries, analyzed over 40 years, they discovered higher degrees of political instability and social polarization, but less democracy and central bank independence associated with more volatile inflation rates. Nadeem et al (2019) analyzed the relationship between economic freedom index (measured by the Fraser Institute), individual components of economic freedom, and GDP per capita growth of five South Asian countries over the period of 1990-2015. Their fixed effects regression results revealed that "GDP per capita growth is positively affected by economic freedom index and this relationship has weakened by the global economic crises of 2008" (Nadeem et al, 2019, p. 60).…”