Abstract

Economic freedoms, which enable people to do economic activities freely, contribute to more investment and economic development in countries. Therefore, countries should be more economically free. The aim of this study is to examine the effects of economic freedoms on foreign trade and foreign direct investment in 15 developing, 15 developed and 10 underdeveloped countries. Second generation panel unit root tests were used in the data of 2000-2017 period. Then, the existence of long-term relationship was tested. According to the results of the study, in the developed countries, according to FMOLS estimator, while economic freedoms increased by 1 unit, exports increased by 0,099 units (0,074 compared to DOLS) and foreign direct investments by 2,352 units (1,599 compared to DOLS). There is no cointegrated relationship between economic freedoms and imports. In developing countries, according to FMOLS estimator, while economic freedoms increased by 1 unit, exports increased by 2,151 units (1.415 compared to DOLS), imports by 3,822 units (1.72 compared to DOLS) and foreign direct investments by 0,177 units (0.169 compared to DOLS). In the underveloped countries, the cointegration relationship between economic freedoms and other variables could not be determined.