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 freedom-growth 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.