Do economic freedom matters for finance in developing economies: a panel threshold analysis

ABSTRACT

Economic freedom is an important determinant of economic development, yet little academic research has considered its financial perspectives. Using a relatively new measure of finance, we find that a high-freedom environment fosters finance in developing economies. Unlike prior literature, the advanced panel threshold estimator shows a single significant economic freedom threshold level of 4.282 as a benchmark, where the relationship turns positive. The findings are robust to alternative estimators and split-sample analysis. The findings are useful for policymakers to attain optimal financial benefits by assuring a high-freedom environment.

KEYWORDS:

• Economic freedom
• finance
• threshold regression
• developing economies

JEL CLASSIFICATION:

• O11
• F65
• B26
• C24

Disclosure statement

No potential conflict of interest was reported by the authors.

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Notes

¹ Not reported for brevity and conciseness.