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The impact of globalization and economic freedom on economic growth: the case of the Latin America and Caribbean countries

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Abstract

This study examines the impacts of globalization and economic freedom on the economic growth of a group of 24 developing countries from the Latin America and Caribbean over a time span ranging from 1995 to 2015. We have constructed two models, one with the globalization’s overall value and another with the political, social and economic dimensions of globalization. Our results point out to the fact that globalization has had a positive impact on the economic growth of these countries in the long-run, as well their economic and social dimensions. Still, the political dimension of globalization did not show any statistically significant effect upon growth. In addition, we have found evidence of a negative impact resulting from economic freedom on the economic growth of these Latin American and Caribbean countries in the long-run. In the short-run, the results have indicated that electric power consumption (in all estimations) and social globalization (in only one estimation) were able to promote the economic growth of these countries. Finally, the negative and significant coefficient of the error correction mechanism in all estimations points out to the presence of cointegration/long-memory relationships between the variables. This study aims to contribute to the enrichment of the globalization-growth and economic freedom-growth literature in the way that it attempts to overcome some of the flaws identified in previous studies. In our analysis we have identified and corrected the presence of outliers, which are quite often neglected, and if not controlled can actually compromise the macro-economic analysis of this region. The results from this study should primarily contribute to guide policymakers in their decisions, thus helping them to draw growth-promoting policies in their respective countries.

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Acknowledgements

The financial support of NECE—Research Unit in Business Science and Economics, sponsored by the FCT—Portuguese Foundation for the Development of Science and Technology, Ministry of Science, Technology and Higher Education, Project UID/GES/04630/2013, is acknowledged. We also would like to express our gratitude for the anonymous reviewers’ comments that we believe have greatly contributed to improve the quality of the paper.

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Authors and Affiliations

  1. Faculty of Economics, University of Coimbra, Av. Dr. Dias da Silva 165, 3004-512, Coimbra, Portugal

    José Alberto Fuinhas

  2. NECE-UBI, Faculty of Economics, University of Coimbra, Coimbra, Portugal

    José Alberto Fuinhas

  3. NECE-UBI, University of Beira Interior, Covilhã, Portugal

    Renato Santiago & António Cardoso Marques

Authors
  1. Renato Santiago
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  2. José Alberto Fuinhas
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Correspondence to José Alberto Fuinhas.

Appendix

Appendix

See Figs. 1, 2 and Tables 6, 7, 8, 9, 10, 11.

Table 6 Descriptive statistics and cross-sectional dependence
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Table 7 Correlation matrices and VIF statistics for Model I
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Table 8 Correlation matrices and VIF statistics for Model II
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Table 9 Panel unit root test (CIPS)
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Table 10 Hausman test
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Table 11 Specification tests
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Santiago, R., Fuinhas, J.A. & Marques, A.C. The impact of globalization and economic freedom on economic growth: the case of the Latin America and Caribbean countries. Econ Change Restruct 53, 61–85 (2020). https://doi.org/10.1007/s10644-018-9239-4

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