Survey of relationship between economic freedom and budget deficits in non-free Countries

Subject Areas : Applied Economics

محمد رضا  شریف آزاده ¹ (ندارد)
فرزاد  هاشمی ² (ندارد)

Received: 2011-05-31 Accepted : 2011-11-08 Published : 2012-03-20

Keywords: economic non-freedom, accumulated budget deficit, monetary and fiscal indiseipli,

Abstract :

Since the limit of economics freedom determines the scope of the market and specifies the sphere of government intervention in the economy, for this reason , in this essay it has been attempted to test the hypothesis of the inverse relationship between the degree of economic freedom and budget deficit in the non-free countries .For this purpose , among the institutions which perform the ranking of the index of economic freedom in the different countries ,Heritage Foundation has been chosen due to its covering of both the cross-section and more time series data ,precision for the numerous and quality of sub-branches and credit estimation approach and being a productive organization of information. Based upon the statistics of  the ratio of budget deficit over gross domestic product (GDP) for free countries ,including ten countries which have had the lowest degree of economic freedom, in the period(1996-2006),using the World Bank statistical sources, calculation has been made by the panel or extensive data and econometric tests. The results coming from the coefficients of the model indicate a significant and inverse relationship between the degree of economic freedom and budget deficit for the non-free countries including Iran,Belarus,Bosnia-Herzegovina,Congo,Ethiopia,Mongolia,Ukraine,Tunisia,Kazakhstan and Bulgaria.