The Impact of Economic Freedom in Economic Growth in Western Balkan Countries

Economic freedom is generally regarded as a driver of growth; however, its impact on economies that have recently transitioned remains unclear. In the Western Balkans, a region characterised by institutional instability and inconsistent market reforms, the influence of economic freedom on long-term economic outcomes necessitates more rigorous empirical examination. This study analyses the impact of five critical dimen-sions of economic freedom: Property Rights, Government Integrity, Government Spending, Business Freedom, and Monetary Freedom on GDP per capita growth in six Western Balkan countries from 2013 to 2023. The study utilises a triangulated analytical strategy, employing the Generalised Method of Moments (GMM) to mitigate endoge-neity, Bayesian Vector Autoregression (VAR) to elucidate dynamic interdependencies, and Random Forest regression to identify non-linearities and prioritise predictor sig-nificance. The GMM findings demonstrate that Property Rights and Monetary Freedom positively and significantly impact economic growth, whereas Government Spending has a detrimental effect. Surprisingly, Government Integrity has a negative relationship with growth, which could be due to problems with transitional governance. Bayesian VAR shows that GDP dynamics are very stable over time, but it doesn't find that EF indicators have any immediate effects. Random Forest analysis shows that Government Spending, Business Freedom, and Property Rights are the most important variables. This is because it finds non-linear and interactive patterns that other models don't. Economic freedom is a significant, albeit contextually variable, factor influencing growth in the Western Balkans. The results indicate that focused institutional reforms, especially those that improve property rights, make public spending more efficient, and lower regulatory barriers, can help the economy do well over time. For the region to grow in the long term, it needs a hybrid policy that combines opening up the market with strengthening governance.