The Impact of Economic Freedom on Economic Growth: A case study of Asian Countries

Abstract

Abstract

The objective of the study is to examine the connection between economic freedom and GDP growth in lower-middle-income South Asian countries—specifically Nepal, Pakistan, Sri Lanka, Bangladesh, and India—from 2000 to 2023. For this purpose, the study uses Quantile regression analysis. Results suggest a positive relationship between economic freedom and economic growth. Gross fixed capital formation, business freedom, and investment freedom are identified as significant contributors to GDP growth, while trade freedom and monetary freedom appear to have a negative impact. Additionally, foreign direct investment does not show a statistically significant influence. The study underscores the importance of country-specific strategies to alleviate foreign exchange pressure, minimize regulatory barriers, and improve market accessibility. The limited influence of foreign direct investment (FDI) indicates the need for more targeted investments, as factors such as sectorial imbalances, weak governance, and infrastructure deficiencies may be hindering its effectiveness.  It advocates for limited government interference in monetary policies and market structures while promoting a conductive environment for foreign investment and trade freedom to support long-term economic growth.