Causality between Economic Freedom and Its Components in Türkiye

Economic freedom is known to be a significant driver towards achieving economic growth. This study is essential to shed light on this issue by analysing how the components and the EFI are linked, to plan suitable policies toward improving EFI, thus promoting GDP per capita and economic growth in Türkiye. Hence, the frequency-domain causality test is used to investigate the link between the components and EFI. Empirical analyses are carried out employing time series data covering the years from 2000Q1 to 2021Q4. The estimation results of the frequency-domain causality test confirm that there is a causality running from LSG, LPR, and LFT to LEFI, whereas no causality is confirmed from LSM and LR to LEFI. Supporting the VAR-based Granger Causality test results, no causality was detected running from LEFI to the components, except the causality running from economic freedom to the government’s size in the long run and short run.