The Impact of Growth and Economic Freedoms on Trade Deficit: Panel ARDL Analysis in MIST Countries

Abstract

Foreign trade allows companies in different countries to have access to a broader market. Thus, it increases competition by offering consumers more options. Economic freedom, trade freedom, and GDP are important factors in international trade and economic policy practices. In this context, the freedom of foreign trade can contribute to promoting economic and trade freedoms. However, it is important to evaluate not only a general assessment but also a country-specific evaluation in terms of short-term adverse effects. This study aims to examine the impact of the Economic Freedom Index, Trade Freedom Index, and GDP on the trade deficit in MIST (Mexico, Indonesia, South Korea, and Turkey) countries. For this purpose, the Panel ARDL analysis method was applied using data from the period 1996-2022. According to the findings, in the long run, the Economic Freedom Index variable has a positive and significant relationship with the trade deficit, while the Trade Freedom Index and GDP variables have a negative and significant relationship. In the short term, significant and positive relationships were observed between the Trade Freedom Index and GDP variables.