Economic Freedom and Economic Crisis

Christian Bjørnskov

No 1056, Working Paper Series from Research Institute of Industrial Economics

Abstract: In this paper, I explore the politically contested association between the degree of capitalism, captured by measures of economic freedom, and the risk and characteristics of economic crisis. After offering some brief theoretical considerations, I estimate the effects of economic freedom on crisis risk in the post-Cold War period 1993-2010. I further estimate the effects on the duration, peak-to-trough GDP ratios and recovery times of 212 crises across 175 countries within this period. Estimates suggest that economic freedom is robustly associated with smaller peak-to-trough ratios and shorter recovery time. These effects are driven by regulatory components of the economic freedom index.

Keywords: Crisis; Economic freedom; Institutions (search for similar items in EconPapers)
JEL-codes: O11 O43 P16 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-01-23
New Economics Papers: this item is included in nep-hpe
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Related works:
Journal Article: Economic freedom and economic crises (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1056

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