Working Paper No. 1056

Economic Freedom and Economic Crisis

Published: January 23, 2015Pages: 31Keywords: Crisis; Economic freedom; InstitutionsJEL-codes: O11; O43; P16
Published version

Economic Freedom and Economic Crisis Christian Bjørnskov


In this paper, I explore the politically contested association between the degree of capitalism, captured by measures of economic freedom, and the risk and characteristics of economic crisis. After offering some brief theoretical considerations, I estimate the effects of economic freedom on crisis risk in the post-Cold War period 1993-2010.

I further estimate the effects on the duration, peak-to-trough GDP ratios and recovery times of 212 crises across 175 countries within this period. Estimates suggest that economic freedom is robustly associated with smaller peak-to-trough ratios and shorter recovery time. These effects are driven by regulatory components of the economic freedom index.

Christian Bjørnskov

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Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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