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Article
Publication date: 7 June 2013

Timothy Peterson

The paper aims to determine if a country's Economic Freedom Index value has any relationship to the return of the related country specific exchange traded fund.

Abstract

Purpose

The paper aims to determine if a country's Economic Freedom Index value has any relationship to the return of the related country specific exchange traded fund.

Design/methodology/approach

A total of 36 country specific exchange traded funds were selected for use in this study. The historical returns for 2011, the three‐year period ending in 2011, and the five‐year period ending in 2011 were recorded if available for each exchange traded fund. Each exchange traded fund (ETF) was placed into one of four groups based upon its country's overall Economic Freedom Index value. The range of Economic Index values for each group was the same ones used by the publishers of the Economic Freedom Index. The mean ETF return and standard deviation for 2011, three‐year, and five‐year periods were calculated for each of the four groups. The mean/standard deviation of the Economic Freedom Index and each of its components for 2011, the mean of the three‐year period, and the mean of the five‐year period were calculated for each of the four groups. The degree of statistical significance between the mean returns of the four groups was determined by using ANOVA. The correlation coefficients and the degree of statistical significance were calculated between each component of the index, between each component and the overall index value, and between the overall index value and the ETF returns.

Findings

The correlations between the components of the Economic Freedom Index generally tend to be positive and statistically significant. The correlations between the components of the Economic Freedom Index and the Economic Freedom Index tend to be positive and statistically significant. The correlation between the mean ETF returns of the various groups and the value of the mean Economic Freedom Index tends to be mixed. There appears to be no statistical significance of the difference between the mean ETF returns of each group and the mean overall score of the Economic Freedom Index for that group. For the year 2011 the level of significance was 0.103, for the three‐year period the level of significance was 0.541, and for the five‐year period the level of significance was 0.132. The differences within each group are more than the differences between the groups. The value of the Economic Freedom Index does not appear to correlate with the return of the country specific exchange traded fund.

Originality/value

The paper relates a country's environment for conducting business as represented by its Economic Freedom Index to the equity returns of firms in that country. The results of this study would be of interest to those individuals or institutions making investment decisions regarding country specific exchange traded funds. If a positive correlation exists between the index value and the return of the exchange traded fund, this information could improve the prediction of country specific exchange traded fund returns.

Details

Managerial Finance, vol. 39 no. 7
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 August 1993

Lewis E. Hill and James E. Jonish

Makes the distinction between negative freedom or liberty, whichmeans the absence of constraint and compulsion, and positive freedom,which always implies the power to make…

Abstract

Makes the distinction between negative freedom or liberty, which means the absence of constraint and compulsion, and positive freedom, which always implies the power to make one′s will effective to gain access to a chosen alternative. Argues that positive freedom can be used either creatively or destructively. The creative use of positive freedom enhances and improves the economic freedom and economic justice that accrues to other people. The destructive use of positive freedom damages and diminishes the economic freedom and economic justice of others. It follows that the government should intervene in the political and social economy to encourage and to facilitate the creative use and to discourage or prohibit the destructive use of positive freedom.

Details

International Journal of Social Economics, vol. 20 no. 8
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 23 October 2009

Carl R. Chen and Ying Sophie Huang

The purpose of this paper is to investigate the relationships between the Index of Economic Freedom, equity market performance and its volatility.

1084

Abstract

Purpose

The purpose of this paper is to investigate the relationships between the Index of Economic Freedom, equity market performance and its volatility.

Design/methodology/approach

The paper examines whether the level of economic freedom is significant for a country's stock market performance and volatiling.

Findings

Regression results show that adjusted stock returns bear little relationship with economic freedom. On the other hand, economic freedom is associated with lower stock market volatility.

Originality/value

The results imply that a country with greater economic freedom provides investors with better mean‐variance investment efficiency.

Details

International Journal of Accounting & Information Management, vol. 17 no. 2
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 11 August 2022

Haman Mahamat Addi and Attahir Babaji Abubakar

This paper analyzes the effect of institutional quality and economic freedom on investment and economic growth in sub-Saharan Africa (SSA).

Abstract

Purpose

This paper analyzes the effect of institutional quality and economic freedom on investment and economic growth in sub-Saharan Africa (SSA).

Design/methodology/approach

Focusing on a panel of 27 countries, the study employed the panel fixed and random effect models to analyze data spanning from 2005 to 2018. The study also employed the Wu–Hausman test to determine if the endogeneity problem exists in the model.

Findings

The findings of the study show that individually, an improvement in economic freedom stimulates economic growth while the improvement in institutional quality is effective in spurring investment. However, the interaction effect of improvement in institutional quality and economic freedom is the stimulation of both investment and economic growth. The findings are robust to alternative model specifications.

Practical implications

The study implies that for SSA countries to effectively achieve higher investment and economic growth outcomes, there is the need to simultaneously strengthen institutional quality and improve economic freedom. Focusing on either of the factors without the other leads to less desirable growth and investment outcomes.

Originality/value

The study examined the combined influence of institutional quality and economic freedom on investment and growth in SSA. To the best of the authors’ knowledge, no study has investigated this in the context of SSA.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Book part
Publication date: 21 October 2019

Bruno Buscariolli and Jorge Carneiro

The effects of economic liberalization have been subject to academic and political discussion for many decades. The trade war between the United States and China brought…

Abstract

The effects of economic liberalization have been subject to academic and political discussion for many decades. The trade war between the United States and China brought new perspectives to this debate and raised the question: do fewer trade barriers and more economic freedom lead to better functioning societies? Following the perspective of the transaction cost theory, we argue that more economic freedom reduces non-productive expenses and allows private companies to improve the allocation of resources. It also allows more competition among companies, which facilitates access to funding. In this research, we use data of 1,248 publicly traded companies in the seven largest Latin American countries to analyze the effect OF increasing economic freedom on administrative expenses and financial. Our results indicate that, on average, increasing economic freedom allows the reduction of transaction costs and facilitates financial leverage for companies.

Details

International Business in a VUCA World: The Changing Role of States and Firms
Type: Book
ISBN: 978-1-83867-256-0

Keywords

Book part
Publication date: 1 November 2018

Min-Yu (Stella) Liao

The literature has documented evidence that economic freedom is positively associated with economic growth, investment spending, income equality, employment, gender…

Abstract

The literature has documented evidence that economic freedom is positively associated with economic growth, investment spending, income equality, employment, gender equality, etc. Economic freedom is also found to be associated with a country’s rule of law and legal regime. There is, however, little studies examining how economic freedom affects a firm’s performance such as firm valuation and profitability. The evidence presented in this study shows that economic freedom strengthens a firm’s valuation and profitability. Additionally, firms headquartered in emerging markets or younger firms from countries with higher levels of economic freedom experience higher valuation and profitability. That is, economic freedom is more beneficial for firms from emerging markets and is crucial to the success of early-stage firms.

Details

International Corporate Governance and Regulation
Type: Book
ISBN: 978-1-78756-536-4

Keywords

Book part
Publication date: 2 December 2019

Frank Fitzpatrick

Abstract

Details

Understanding Intercultural Interaction: An Analysis of Key Concepts
Type: Book
ISBN: 978-1-83867-397-0

Article
Publication date: 17 August 2021

Rafael Acevedo, Jose U. Mora and Andrew T. Young

Mora and Acevedo (2019) report that the government spending multipliers in Latin American countries are notably higher than what is typically reported for developed…

Abstract

Purpose

Mora and Acevedo (2019) report that the government spending multipliers in Latin American countries are notably higher than what is typically reported for developed economies. Latin American countries have been inclined toward using procyclical fiscal policies. Those policies have been perceived as being effective at mitigating the effects of the 2008–2009 Great Recession. This study aims to estimate the government spending multiplier using Latin American panel data from 19 Latin American countries from 2000 to 2018. The estimates are conditional on the extent of openness, capital mobility and economic freedom. Based on the results, the latter is important: the less economically free a country, the larger its spending multiplier. Lower economic freedom in Latin American countries can help to account for their large spending multipliers. In particular, restrictions on international trade are positively associated with multipliers. This is the case even while controlling the trade share of GDP.

Design/methodology/approach

The authors provide regression results that are conditional on the extent of openness, capital mobility and economic freedom.

Findings

The less economically free a country, the larger its spending multiplier. Lower economic freedom in Latin American countries can help to account for their large spending multipliers. In particular, restrictions on international trade are positively associated with multipliers. This is the case even while controlling the trade share of GDP.

Originality/value

To the best of the authors’ knowledge, this is first study to estimate the fiscal multiplier conditional on economic freedom levels. The authors provide correctly calculated multipliers conditional on different levels of economic freedom. The authors point the way to future studies considering the effectiveness of fiscal policy conditional on institutional/policy quality.

Article
Publication date: 21 June 2019

Ryan H. Murphy

A large empirical literature has found positive effects of economic freedom on economic outcomes, such as output and per capita growth. However, several variables in the…

Abstract

Purpose

A large empirical literature has found positive effects of economic freedom on economic outcomes, such as output and per capita growth. However, several variables in the index are very likely to decline in conjunction with recessions. The purpose of this paper is to determine whether, in the absence of these variable, whether the positive relationship between economic freedom and economic output remains.

Design/methodology/approach

This paper makes use of a dynamic panel to compare the performance of economic freedom with and without variables endogenous to business cycles, which pertain to levels of government spending, rates of inflation, government borrowing and interest rates.

Findings

Two specifications fall in their statistical significance from the 1 to the 10 per cent level when variables relating to inflation are omitted. The worst case considered finds one specification size of the effect is still 66.3 per cent of the effect size of the standard measure of economic freedom.

Practical implications

These findings are consistent with this kind of endogeneity being a minor problem with the data set when imperfect identification strategies are used, but the issue should be strongly considered when business cycles are pertinent to a research question that makes use of economic freedom data.

Originality/value

This paper contributes to the small literature focused on the robustness of the effect of economic freedom on output, while raising a specific concern that has not yet been explicitly addressed.

Details

Journal of Financial Economic Policy, vol. 12 no. 1
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 3 December 2018

James Oladapo Alabede

This study aims to expand the conventional tax effort model to incorporate relevant economic freedom variables to investigate whether economic freedom fosters tax revenue…

Abstract

Purpose

This study aims to expand the conventional tax effort model to incorporate relevant economic freedom variables to investigate whether economic freedom fosters tax revenue performance in `sub-Saharan Africa (SSA).

Design/methodology/approach

This study uses data from 42 countries across the four sub-regions of SSA from the period 2005 to 2012 with 252 year-country observations in an unbalanced panel method. The data were statistically treated using feasible generalised least square (FGLS) and panel-corrected standard errors (PCSE) estimate techniques.

Findings

The findings are twofold. First, the principal finding of the study suggests that economic freedom promotes tax revenue performance. Precisely, the FGLS analysis indicates that property rights freedom, freedom from corruption and investment freedom, as well as the composite economic freedom, exerted positive significant impact on tax revenue performance. This implies that country, which attained high degree of economic freedom, is likely to have higher tax-to-GDP ratio than a country with low level of economic freedom. Secondly, the results of most conventional variables conform to the prediction in the traditional theory except per capita income. Specifically, agriculture share in GDP and per capita income indicate negative significant relationship with tax revenue performance.

Originality/value

Because little is known empirically about the connection between economic freedom and tax revenue performance, this study extended the conventional tax effort model to incorporate the economic freedom to bridge the knowledge gap due to the absence of empirical evidence on the relationship between economic freedom and tax effort.

Details

Journal of Financial Reporting and Accounting, vol. 16 no. 4
Type: Research Article
ISSN: 1985-2517

Keywords

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