Abstract:
This study aims to examine whether economic freedom matter for economic growth in Sri Lanka using the annual time
series data over the period 1996-2020. Exploratory data analysis and inferential data analysis techniques were employed
as the analytical tools. The exploratory data analysis indicates a positive relationship between economic freedom and
economic growth, the unit root tests confirm that the variables are I(1), the ARDL Bounds cointegration test finds a long run relationship between the variables, the long-run estimated coefficient of variables used in this study point out that the
key variable of economic freedom is statistically significant and positively different from zero, the estimated coefficient of
error correction term implies that the response variable of economic growth moves towards the long-run equilibrium, the
Granger causality test shows a one-way causality running from economic freedom to economic growth. The impulse
response function analysis indicates that a positive shock to economic freedom has an immediate significant positive
impact on economic growth.
