Innovative Solutions for Economic Growth: Exploring the Impact of Economic Freedoms on Foreign Direct Investment Attraction

Abstract Economic freedoms are essential for the growth and development of countries, but their distribution varies across nations, resulting in differences in economic growth. This study aims to explore the impact of economic freedoms on economic growth, measured by gross domestic product (GDP) per capita and foreign direct investment (FDI) inflow, by examining the influence of institutional quality. Economic freedom indicators were obtained from the 2022 report by the Heritage Foundation, and GDP per capita and FDI indicators were sourced from the World Bank report. This study employs multivariate regression analysis to investigate the relationship between economic freedoms and economic growth. The findings suggest that economic freedoms have a positive effect on both GDP per capita growth and FDI inflow. Government integrity was found to be the primary indicator for GDP per capita growth, while Business freedom was identified as the key factor in attracting FDI. The implications of these results are significant, as they can inform policy decisions aimed at improving the standard of living by increasing GDP per capita and creating employment opportunities through FDI.