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The nexus between economic freedom and economic growth in the LDCs. An empirical analysis for the period 2000-2021

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  • António Afonso
  • M. Carmen Blanco-Arana

Abstract

Economic freedom and economic growth can be connected in most countries, but it is often necessary to specify those aspects of economic freedom that can foster economic growth. This paper examines the nexus between economic freedom and economic growth in the Least Developed Countries (LDCs) using panel data for the period 2000-2021. Results show that, in general, economic freedom positively influences economic growth in the LDCs. Moreover, most economic freedom factors raise economic growth. However, the effect of government spending, fiscal and financial freedom on economic growth is negative. Using a Principal Component Analysis for the economic freedom sub-indicators confirms the results.

Suggested Citation

  • António Afonso & M. Carmen Blanco-Arana, 2023. "The nexus between economic freedom and economic growth in the LDCs. An empirical analysis for the period 2000-2021," Working Papers REM 2023/0297, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp02972023
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    More about this item

    Keywords

    economic freedom; economic growth; LDCs; financial development; panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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