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Most studies that emphasize and encourage the shift towards a less regulated and financially open system rest on the premise of a prosperous growth prospect. Accordingly, interests have focused on growth models as a framework to understand and to analyze the effects of economic freedom. This paper investigates the short-run characteristics of economic freedom. Using a stochastic general equilibrium framework, it is argued that economic reforms tend to ease periods of recession, increase welfare and alleviate the burden of unemployment. Calibrated to the Egyptian economy, the model is simulated and the (robust) relationship between economic reforms and the business cycle is investigated.
Published Online: 2005-4-1
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
