Economic Freedom as a Driver of International Capital Allocation: New Evidence from Global Markets

Abstract

This study examines the role of economic freedom in shaping international capital allocation across global markets. Using cross-country data and composite indices of economic freedom, the analysis evaluates how institutional quality, regulatory efficiency, and property rights influence foreign investment flows. The findings indicate that higher levels of economic freedom are consistently associated with increased capital inflows and improved investment stability. The results suggest that institutional transparency and market openness reduce investment risk and enhance investor confidence. This study contributes to the international finance literature by providing updated empirical evidence on the institutional determinants of global capital mobility.