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A Random Walk to Economic Freedom?

Author

Listed:
  • Frank Hefner
  • Mark David Witte

Abstract

Given the wide use of economic freedom in economic literature it is imperative to understand how economic freedom evolves. Results suggest that levels of economic freedom are dominated by random shocks. Using a test for stationarity devised by Westerlund and Larsson (2012) we are unable to reject the null hypothesis of a random walk. The changes to economic freedom also are mostly driven by random shocks with only a minor role played by country specific characteristics. Additionally, changes to economic freedom are partially reversed as increases (decreases) in one year are partially offset by decreases (increases) in the next year.

Suggested Citation

  • Frank Hefner & Mark David Witte, 2013. "A Random Walk to Economic Freedom?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(1), pages 27-47, April.
    • Handle: RePEc:liu:liucej:v:10:y:2013:i:1:p:27-47
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    File URL: https://ejce.liuc.it/18242979201301/182429792013100102.pdf
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    More about this item

    Keywords

    economic freedom index; random walk; growth;
    All these keywords.

    JEL classification:

    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General
    • H1 - Public Economics - - Structure and Scope of Government

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