Economic Freedom-Growth Nexus in South Asian Countries

Budhathoki, Prem Bahadur; Hamal, Janga  Bahadur; Karki, Murari

Advanced Research in Economics and Business Strategy Journal
Volume 7, Numéro 1, Pages 142-159
2026-06-30

Economic Freedom-growth Nexus In South Asian Countries

Authors : Budhathoki Prem Bahadur . Hamal Janga Bahadur . Karki Murari .

Abstract

Previous studies pay less attention to how economic freedom (EFI) affects economic growth, especially in the context of South Asian countries. Therefore, this study primarily examines the effect of EFI on economic growth in the context of five South Asian countries—Bangladesh, India, Nepal, Pakistan, and Sri Lanka— over the period 1995-2024. The multicollinearity issues are checked by Pearson's correlation and VIF. As a pre-estimation analysis, we performed the CD-test, unit root test, and cointegration test. We used Panel-corrected Standard Error (PCSE) for baseline regression results, the Feasible Generalized Least Squares (FGLS), and Random-effect (RE) estimators for the sensitivity analysis. The outcome demonstrated that the EFI stimulates growth in South Asian countries. The results also revealed that Gross Capital Formation (GCF), Labor Force Participation (LFP), Access to Electricity (ATE), and Inflation have a favorable impact on growth. However, the Foreign Direct Investment (FDI) has a negligible impact on growth in South Asian countries. Policymakers can use findings to achieve desired economic growth in this region.