The impact of economic freedom on the likelihood of economic crisis occurrence

The economic crisis in the past centuries has had a detrimental effect on the performance of the economy in different countries. The present study examines the impact of economic freedom on the occurrence of economic crisis in 150 countries over the period 2005-2007. To achieve this goal, the Logit Panel model was used in this study. Four aspects of the key of economic freedom have been used as independent variables in estimation, the two variables of government size and regulation efficiency had no significant relationship with the economic crisis. Our estimation suggests that there is a positive and significant relationship, however small, between the market openness variable and the probability of economic crisis. There is also a slight inverse relationship between the rule of law and the likelihood of a crisis.