EVALUATING ECONOMIC FREEDOM VIA A MULTI-CRITERIA MEREC-DNMA MODEL-BASED COMPOSITE SYSTEM: CASE OF OPEC COUNTRIES

Abstract

Economic freedom indicators create a beneficial and suitable guide and a crucial reference for investors, policymakers, lenders, and market researchers worldwide. In light of these indicators, the economic freedom performances of countries can be determined. The Heritage Foundation annually releases a ranked list of the country based on their performance in terms of fourteen economic freedom criteria with equal weights through a simple aggregation approach. According to an average-based aggregator, equal weight of economic freedom criteria and calculating rank of countries cannot be a completely reliable approach. Thus, this work establishes a composite index system in the form of a decision support system that employs the method based on the removal effects of criteria (MEREC) and the double normalization-based multi-aggregation (DNMA) to specify the economic freedom levels of the OPEC countries. MEREC obtains the importance weights of indicators without the interference of any stakeholder or decision-makers. Afterward, DNMA, as a novel ranking multi-criteria method, is applied to sort countries based on their performance against all economic freedom criteria. This is the first attempt in the literature to calculate the index of economic freedom utilizing an integrated multi-criteria decision support model. Whereas “investment freedom” is the most significant indicator of economic freedom, the UAE is in the best position in terms of economic freedom among OPEC countries. A fourphased sensitivity control is also performed so as to verify the robustness and usefulness of the developed decision tool.