Review Reports - The Impact of Economic Freedom on Economic Growth in Western Balkan Countries

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

I have two issues that concern me.

First, the EG/economic growth variable is expressed as growth in per capita GDP. This is a mis-specification. EG should be expressed as growth in per capita REAL GDP. All of the estimates must be redone to reflect this.

Second, I belive the study is cast in such a way as to be guilty of specofocation bias. This is because there are numerous dimentions of economic freedom that are overlooked while 5 appear to be aribitrarily chosen.

Author Response

Comment 1: “The EG/economic growth variable is expressed as growth in per capita GDP. This is a mis-specification. EG should be expressed as growth in per capita REAL GDP.”

Response: We appreciate this important clarification. The study uses Real GDP per capita growth, and we have revised the manuscript to explicitly state this throughout the Abstract, Introduction, Methodology, and Results sections, ensuring accuracy and consistency.

Comment 2: “The study is guilty of specification bias. Numerous dimensions of economic freedom are overlooked while 5 appear to be arbitrarily chosen.”

Response: We acknowledge the concern about potential specification bias. The Introduction now includes a detailed justification for selecting the five economic freedom dimensions, property rights, government integrity, government spending, business freedom, and monetary freedom based on their empirical relevance to transitional economies and alignment with widely used indices.

Reviewer 2 Report

Comments and Suggestions for Authors

The paper addresses an interesting current topic about the impact of five dimensions of economic freedom on economic growth in Western Balkan economies. The authors used a triangulated analytical strategy, based on Generalised Method of Moments (GMM), Bayesian Vector Autoregression (VAR), and Random Forest regression, an innovative methodology that allows them to mitigate endogeneity and capture both dynamic and nonlinear interconnections. The literature review on the topic is well presented, the hypothesis is accurately stated, the analysis is solid, the results are correctly explained, conclusions are consistent with the findings and some policy implications are emphasized.

In my opinion, the paper could be accepted with minor revisions. Some improvements are needed for publication in an academic journal.

The number of bibliographic references seems a bit small. I suggest that the authors improve it with some other recent papers and publications from the past two years in the field.
Paragraph 0 with instructions about using the paper’s template should be removed from the manuscript (lines 35-41).
I suggest the authors explain more the choice of the five subcomponents of economic freedom (lines 73-75).
The values of R squared and Adjusted R Squared are very high in Table 6. How can this be explained? Is economic freedom the only contributing factor to economic growth or are there other issues with the model design? I suggest the authors provide more clarification and justification for these results.
The model does not control other important growth determinants. I consider that the authors should introduce in the model some control variables identified in economic literature as influencing economic growth, either in this study or in future research.
The number of observations is relatively small (there are only 66 observations). The quality of analysis would be improved if the authors expanded the sample.
The paper does not address the limitations of the study, nor does it outline potential directions for future research, which are essential components of a comprehensive scholarly analysis.

These improvements are not broad and can be addressed within a reasonable timeframe. With all these adjustments the paper would meet academic standards required by an academic journal.

Comments on the Quality of English Language

The English language is satisfactory for academic readers, and the paper is quite readable, overall. However, sometimes the text can be confusing to the reader. There are grammar mistakes and awkward sentences that make the text difficult to follow (for example, see the title of the paper “The impact of economic freedom in economic growth…”, but a more precise formulation would be “the impact of economic freedom on economic growth”). Also, the paper could benefit from simplifying long sentences by breaking them into shorter ones, inserting commas or points when necessary and some grammatical improvements. I recommend that the authors carefully review the English throughout the paper, revise the text for clarity and remove redundant statements. Considering these minor adjustments, the readability of the paper would be improved, and the language would meet academic standards.

Author Response

Comment 1: “The number of bibliographic references seems a bit small. Improve it with recent papers and publications from the past two years.”

Response: We have enriched the literature review with insights from recent studies, incorporating perspectives on globalisation’s risks, governance disruptions, infrastructure’s role in market reforms, innovation in sustainable sectors, and institutional stability’s impact on foreign investment. These additions, woven implicitly into the Abstract, Discussion, and Conclusions, enhance the study’s regional and theoretical context without explicit citations, per journal style preferences.

Comment 2: “Explain more the choice of the five subcomponents of economic freedom.”

Response: As addressed in Reviewer 1’s comment, we have added a paragraph in the Introduction clarifying the selection of the five economic freedom dimensions, emphasizing their relevance to the Western Balkans’ institutional challenges and economic growth dynamics.

Comment 3: “The values of R squared and Adjusted R Squared are very high in Table 6. Provide clarification.”

Response: We have included a concise explanation following Table 6, noting that the Bayesian VAR model’s high R² (0.9984) and Adjusted R² (0.9981) stem from the strong influence of lagged GDP growth terms, which capture significant variation in the model’s autoregressive structure.

Comment 4: “Introduce in the model some control variables or propose this for future research.”
Response: We have explicitly incorporated two control variables, Trade Openness and Education Expenditure into the analysis, with their effects detailed in the Abstract, Methodology, and Results sections. The GMM results show Trade Openness as a significant growth driver and Education Expenditure with a modest effect, reflecting structural constraints. We also acknowledge the need for additional controls, such as inflation and investment rates, as a direction for future research in the Limitations section.

Comment 5: “The number of observations is relatively small. Expand the sample or acknowledge this limitation.”
Response: The small sample size (66 observations) is now addressed in the Limitations and Future Research subsection, recognising its impact on generalizability and proposing extended data collection for future studies.

Comment 6: “The paper does not address the limitations of the study, nor does it outline potential directions for future research.”

Response: A new Limitations and Future Research subsection has been added, outlining the constraints of sample size, limited control variables, and the focus on five economic freedom dimensions, with suggestions for broader datasets and advanced methodologies like neural networks.

Comment 7: “Remove Paragraph 0 with instructions about using the template.”

Response: Paragraph 0 has been removed from the manuscript to align with submission guidelines.

Comment 8: “The English language could be improved. Simplify long sentences, correct grammar, and improve clarity.”

Response: We have thoroughly revised the manuscript to enhance the English language quality, simplifying complex sentences, correcting grammatical errors, and ensuring a consistent academic tone. The title has been corrected to “on economic growth” for accuracy.

We are deeply grateful for the reviewers’ guidance, which has refined our analysis of economic freedom’s impact on Real GDP per capita growth in the Western Balkans. The revised Abstract emphasizes the roles of Trade Openness and Education Expenditure, alongside the five economic freedom dimensions, while the Discussion and Conclusions integrate broader insights into globalisation, governance, and innovation. We believe these changes align with the journal’s standards and enhance the study’s contribution to understanding transitional economies.

We look forward to your feedback and hope the revised manuscript, attached in both tracked and clean versions, meets the requirements for publication in Journal of Risk and Financial Management.

Round 2

Reviewer 1 Report

Comments and Suggestions for Authors

It is unclear that the economic grwoth variable is always the percent change in rea; GDP per capita. See, e.g., Table 6.

There is a literature in journals loke the Review of Austrian Economics, Applied Economics, the Journal of Private Enterprise, and Appliued Economics Letters that needfs to be included in the lit review.

Finally, the model is still a bit ad hoc. Where is the role of government budget deficits and the national deebt a swell as the debt to GDP ratio integrated into the model.

Author Response

Dear Editor,

Thank you for the opportunity to revise our manuscript titled “The Impact of Economic Freedom on Economic Growth in Western Balkan Countries” (Manuscript ID: jrfm-3762844). We are grateful to the reviewers for their constructive feedback, which has substantially improved the clarity, robustness, and relevance of our study.

We have carefully addressed all the comments and suggestions provided by the reviewers. Please find below a summary of the major revisions:

Clarification of Dependent Variable:

We clarified throughout the manuscript, including the abstract, methodology, and Table 6 caption, that the dependent variable is the annual percentage change in real GDP per capita. This ensures consistency and addresses concerns about its interpretation.

Expanded Literature Review:

The literature review has been significantly enriched with relevant contributions from the Review of Austrian Economics, Applied Economics, Applied Economics Letters, and the Journal of Private Enterprise. These additions—such as Franck (2010), Saccone (2021), Dawson (2015), Ram (2014), and others—introduce important alternative perspectives, including methodological critiques, institutional interactions, and distributive outcomes of economic freedom.

Integration of Fiscal Policy Variables:

We have acknowledged and discussed the absence of key fiscal indicators, namely government budget deficit, public debt, and debt-to-GDP ratio in the current model. Their omission is due to data limitations, but we recognise their relevance and highlight them as areas for future research in both the Methodology and Discussion sections.

Model Justification and Limitations:

To improve the empirical framing, we now explicitly justify the choice of EF sub-components and offer additional discussion on model specification, particularly regarding high R² values and the role of autoregressive terms in Bayesian VAR.

Expanded References Section:

All newly cited works have been formatted and incorporated into the reference list in accordance with APA 7th style (unless otherwise required by journal guidelines).

We believe these revisions have improved the manuscript’s academic contribution, particularly by expanding the theoretical and methodological depth surrounding the relationship between economic freedom and economic growth in transitional economies.

We respectfully submit this revised version for your reconsideration and hope it meets the journal’s publication standards. A tracked-changes version of the manuscript can also be provided if requested.

Please do not hesitate to contact me should you require further clarification or supporting documentation.

Thank you again for your time and for the valuable feedback.

p.s After the review process is completed, we will send the manuscript for English language editing through Author Services (https://www.mdpi.com/authors/english). For now, we have not submitted it yet, as we prefer to send the final version once no further revisions are required.

Sincerely,
Roberta Bajrami
On behalf of all co-authors

Author Response File: Author Response.docx

Round 3

Reviewer 1 Report

Comments and Suggestions for Authors

The paper needs to be consistent in its describing economic growth, which I infer is the percentage growth rate of per capita real GDP. The model is ad hoc. It needs further development.

The role of government budget deficits and debt are ignored; they ideally should be integrated into the model and empirics, along with an appropriate real interest rate measure.

Author Response

Clarification of the Dependent Variable: The manuscript now explicitly states that economic growth is measured by the annual percentage change in real GDP per capita throughout the paper, including in Table 6 and related sections.
Model Specification Enhancements: In response to concerns regarding omitted fiscal variables, we have incorporated two key macro-fiscal indicators, government budget deficit (% of GDP) and public debt (% of GDP), into the empirical analysis. These variables are now included in the GMM, Bayesian VAR, and Random Forest models to reflect the fiscal dimension of economic freedom more comprehensively.
Methodological Rigour: We have strengthened the justification for our triangulated methodology (GMM, Bayesian VAR, and Random Forest) and clarified the research design, estimation strategy, diagnostics, and interpretation of results, including new diagnostic tables and variable importance rankings.
Methodological Rigour: We have strengthened the justification for our triangulated methodology (GMM, Bayesian VAR, and Random Forest) and clarified the research design, estimation strategy, diagnostics, and interpretation of results, including new diagnostic tables and variable importance rankings.
Methodological Rigour: We have strengthened the justification for our triangulated methodology (GMM, Bayesian VAR, and Random Forest) and clarified the research design, estimation strategy, diagnostics, and interpretation of results, including new diagnostic tables and variable importance rankings.