Examining The Relationship Between Economic Freedom Index And Domestic Credit In Southeastern European Cooperation Member Countries Using Panel Data Method

The aim of this study is to assess the impact of economic freedoms on domestic credit to the private sector in the member countries of the Southeast European Cooperation, namely Albania, Bulgaria, Greece, Croatia, Romania, Slovenia, and Turkey. In this context, Fractional Frequency Flexible Fourier Form Panel Cointegration Test, and single-frequency panel Fourier granger causality test have been used to reveal the relationship and direction between economic freedom and domestic credit to the private sector. The analysis was conducted using annual data for the period 1995-2021. Empirical analyses showed a statistically significant long-term relationship between the domestic credit dependent variable for the private sector and the independent variable of economic freedoms through the cointegration tests. The results of the Fourier Toda-Yamamoto Causality Test, which examines short-term relationships, show that there is a one-way causality relationship from economic freedoms to domestic credit to the private sector in the case of Albania, Bulgaria, and Slovenia, while no causality relationship was identified for the other countries. However, no causality relationship was identified for the other countries. Consequently, economic freedoms affect the amount of domestic credit to the private sector by banks in the long run.