The Index of Economic Freedom and Economic Growth in Transition Economies

Abstract

In this article authors first look at the relationship between market-based economic institutions and economic growth for transition economies. Though prior studies have found that those transition economies with a greater development of their financial infrastructure and other market-based conditions in the period prior to the transition era as well as during the transition period appear to achieve a greater growth in their GDP. However, some conflicting evidence remains if we look at the extensiveness and effectiveness of market-based economic institutions as these terms are defined by the European Bank for Reconstruction and Development. Accordingly, in this article, the authors study the relationship between GDP and the Index of Economic Freedom (IEF) as defined by the Heritage Foundation.