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 crises. 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 peakto-trough ratios and shorter recovery time. These effects are driven by regulatory components of the economic freedom index.
European Journal of Political Economy
Economic Freedom and Economic Crises
Vetenskaplig artikel på engelska