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Economic freedom and trade flows

Economic freedom and trade flows PurposeEconomic freedom is the fundamental right of every person in a free society to control his/her own labor and property without government intervention beyond what is necessary to protect and maintain freedom itself. The purpose of this paper is to examine the association between economic freedom, inward foreign direct investment (FDI) and trade flows.Design/methodology/approachThe authors test a moderated mediation model of the effects of economic freedom on trade flows with the objective of exploring the mediation effects of FDI and the moderating effects of government stability.FindingsBased on a sample of 155 countries from different geographical areas, the study shows that economic freedom is associated with inward FDI, which, in turn, predicted trade flows. Furthermore, government stability moderated the relationship between economic freedom and FDI.Originality/valueThis study goes beyond the traditional focus on the macro determinants of trade flows and explores the link between economic freedom and trade flows, and the roles of inward FDI and political stability in the context of this relationship. It also provides a novel methodological approach to examine this relationship. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Economic freedom and trade flows

Seyoum, Belay; Ramirez, Juan
Journal of Economic Studies , Volume 46 (4): 22 – Aug 5, 2019
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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0144-3585
DOI
10.1108/JES-12-2017-0378
Publisher site
See Article on Publisher Site

Abstract

PurposeEconomic freedom is the fundamental right of every person in a free society to control his/her own labor and property without government intervention beyond what is necessary to protect and maintain freedom itself. The purpose of this paper is to examine the association between economic freedom, inward foreign direct investment (FDI) and trade flows.Design/methodology/approachThe authors test a moderated mediation model of the effects of economic freedom on trade flows with the objective of exploring the mediation effects of FDI and the moderating effects of government stability.FindingsBased on a sample of 155 countries from different geographical areas, the study shows that economic freedom is associated with inward FDI, which, in turn, predicted trade flows. Furthermore, government stability moderated the relationship between economic freedom and FDI.Originality/valueThis study goes beyond the traditional focus on the macro determinants of trade flows and explores the link between economic freedom and trade flows, and the roles of inward FDI and political stability in the context of this relationship. It also provides a novel methodological approach to examine this relationship.

Journal

Journal of Economic Studies – Emerald Publishing

Published: Aug 5, 2019

References

  • Transaction cost of impairments to international trade: lessons from Egypt
  • Unbundling institutions
  • The colonial origins of comparative development: an empirical investigation
  • Foreign direct investment, economic freedom and economic performance in Sub-Saharan
  • The impact of transaction costs on the direction of trade: empirical evidence for Asia Pacific