INSTITUTIONAL DEVELOPMENT AND BUSINESS FREEDOM: INSIGHTS FROM DEVELOPING NATIONS

Abstract

This study investigates the relationship between institutional development and business freedom in developing nations. Through extensive analysis, the research explores how various factors such as fiscal freedom and monetary policies influence the business environment in these countries. The findings reveal a nuanced relationship between fiscal freedom and business freedom, indicating a negative and statistically significant impact of fiscal freedom on business freedom. Conversely, the study finds that monetary freedom has an insignificant effect on business freedom in developing countries. Moreover, the research highlights the crucial role of government effectiveness, political stability, and trade freedom in fostering a conducive environment for business operations within developing economies. Countries with higher levels of government effectiveness and political stability tend to exhibit greater business freedom, while trade freedom also emerges as a significant determinant in promoting favorable business conditions. One notable implication of the study's findings is the need for developing countries to reassess their fiscal policies, particularly in terms of government expenditures. The prevalence of non-developmental expenditures suggests a potential obstacle to business freedom, underscoring the importance of rationalizing government spending to mitigate adverse effects on the business environment. Furthermore, the research underscores the importance of promoting government effectiveness, political stability, and trade freedom as strategic measures to enhance business freedom in developing nations. By prioritizing these aspects of institutional development and policy formulation, policymakers can create an enabling environment that encourages entrepreneurship, investment, and economic growth. Overall, the insights gleaned from this study provide valuable guidance for policymakers and stakeholders seeking to improve business freedom and foster sustainable economic development in developing countries. By addressing key institutional and policy challenges, these nations can unlock their full economic potential and create opportunities for prosperity and progress.