Economic Freedom and Economic Growth in Pakistan: Causal Investigation

It is experiential from growth literature that nations which have fewer restrictions on private economic activity and transactions be inclined higher level of economic growth. Although economic freedom and economic prosperity move side by side, and up till know too much research work have been done on this hot issue, even though study of nature of relationships between targeted variables has research thrust. Exploration of that either economic freedom causes growth, economic growth causes freedom or may be the possibilities of bilateral causation, especially in developing countries is still in research pipeline. In this study to appraise the possibilities of relationships between economic freedom and economic growth in Pakistan, Granger-causality tests are performed on annually observed economic freedom index and growth deputy. We use 38 annual observations for analysis. Index of economic freedom is taken from Ph.D thesis and we measure it by adopting the methodology of “The Fraser Institute Vancouver Canada.” Our results demonstrate that economic growth caused the economic freedom in Pakistan.