Chapter 4 : Macroeconomic Volatility and Economic Freedom — a Preliminary Analysis

One aspect of the preceding quotation has been extensively studied in the economics literature. Numerous studies have examined the relationship between economic freedom and long-run economic growth across countries.1 The other aspect of Friedman’s statement—that referring to the relationship between economic freedom and shortrun macroeconomic stability—has received relatively little attention in the literature.2 One possible explanation for this omission is that institutions such as economic freedom change only gradually over time and, thus, are more likely to be viewed as deep determinants of long-run growth rather than the type of transitory shocks that might