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A Random Walk to Economic Freedom?

Frank Hefner and Mark Witte ()

European Journal of Comparative Economics, 2013, vol. 10, issue 1, 27-47

Abstract: Given the wide use of economic freedom in economic literature it is imperative to understand how economic freedom evolves. Results suggest that levels of economic freedom are dominated by random shocks. Using a test for stationarity devised by Westerlund and Larsson (2012) we are unable to reject the null hypothesis of a random walk. The changes to economic freedom also are mostly driven by random shocks with only a minor role played by country specific characteristics. Additionally, changes to economic freedom are partially reversed as increases (decreases) in one year are partially offset by decreases (increases) in the next year.

Keywords: economic freedom index; random walk; growth (search for similar items in EconPapers)
JEL-codes: P5 P00 H1 (search for similar items in EconPapers)
Date: 2013
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European Journal of Comparative Economics is currently edited by Matteo Migheli, Giovanni Ramello, Koji Domon, Peter Grajzl, David M. Kemme, Marcello Signorelli and Richard Watt

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Handle: RePEc:liu:liucej:v:10:y:2013:i:1:p:27-47