EXAMINING FRIEDMAN HYPOTHESIS ON POLITICAL, CIVIL AND ECONOMIC FREEDOM FOR SAARC COUNTRIES: A DYNAMIC PANEL DATA ANALYSIS

Abstract

This paper empirically examines the on political, civil and economic that, a country can have a high degree of civil freedom, and a high degree of economic without any political freedom, but can not have any political if it does not have some degree of civil and economic freedom. Using panel data of five SAARC countries over the period 1995-2011, the dynamic panel data econometric techniques and Granger-causality tests validated the regarding economic and political freedom, but regarding civil and political the reverse is found true. estimates of the empirical model using UECM show that economic has significant short-run and long-run effects in improving the political in the SAARC region.Keywords: Political Freedom, Civil Freedom, Economic Freedom, Dynamic Panel DataJEL classification: F49, O5, P5(ProQuest: ... denotes formulae omitted.)1. INTRODUCTIONThe world has experienced unprecedented democratic wave during the last four decades that Samuel Huntington (1993) called the Third Wave of democratization. revolution of that began in the 1970s was amplified by the collapse of Communism in the 1990s and the widespread acceptance of the economic policies of the Washington consensus. This boom reversed the earlier trend toward state intervention and socialism, which began to take hold at the beginning of the twentieth century (Rosa and Vanssy, 1995). boom has been observed in political democracy and freedom, and civil and economic which have been accompanied by a movement towards competitive markets, liberalization, and the globalization of previously closed economies. This as Milton called The Tide Is Turning.1Milton in his famous book Capitalism and Freedom (1962) made one of the most influential arguments for economic liberalism at a time when the ideas of liberals (in the traditional sense) were distinctly unfashionable. world-wide shift from autocracy toward civil and economic and democratization has led to substantial research on the interrelationship between various freedoms. In Capitalism and Freedom, sought to establish an argument about the interconnectedness of economic and political freedom, known as liberal hypothesis or Friedman hypothesis which asserts that economic is an indispensable means towards achievement of political freedom. According to (1962, p. 10) History suggests only that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition.With the development of the relationship between economic and political freedom, a third category of has been added to the mix in the subsequent years, namely social or civil freedom. himself has argued for the need of such addition in a number of lectures.2 He said, I've grown increasingly to think that we need to make three classifications (of freedom) instead of two: economic freedom; social or civil freedom; and political freedom. ... You can have a high degree of social freedom, and a high degree of economic without any political freedom. What's not clear is whether you can have any political if you don't have some degree of the other freedom (2002, p. 17). This is the new version of the Hypothesis.This paper aims to offer evidence concerning the direction of the trichotomic causation between measures of economic, civil and political freedom, and examines whether Freidman's New Hypothesis holds in case of South Asian Association of Regional Cooperation (SAARC), using panel data set of five SAARC member countries over 1995-2011 period. South Asia, a region of about 23 percent of global population having only 2 percent of global income, finds itself in the midst of significant economic, political and social transformation since the early 1990s. …