Free market economy: Is the market or prices free? Theory and evidence from the United States

Abstract

Global price increases have reached their highest levels in recent times. Finding the reasons for the price increase is very important for economic stabilization. In this paper, it has been estimated that exorbitant price increases may be related to a free market economy. For this purpose, unlike other studies, a comparative analysis of the impact of the free market economy on prices was conducted. The study covers the period 1990–2020, and using the U.S. economy, which is a free market economy, the relationship between property rights, the size of government in the economy, and prices were examined using the autoregressive distributed lag model. The results show that the free market model has a positive effect on the price increase, while the size of the government's economy does not affect the price increase in the same direction. This study aims to provide a different perspective to policymakers in the fight against price instability, which is one of the most important problems facing the economy.