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On the effect of full-fledged IT adoption on stock returns and their conditional volatility: Evidence from propensity score matching

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  • Dridi, Ichrak
  • Boughrara, Adel

Abstract

Applied research on central banking has attempted to assess the effects of adopting full-fledged inflation targeting on several macroeconomic variables, while the impact of financial variables has been under-researched so far. This paper fills this gap by assessing and quantifying the effect of full-fledged inflation targeting on stock returns and their conditional volatility. For this purpose, it implements the Propensity Score Matching (PSM), which is immune against reverse-causality, self-selection and omitted-variable biases, on a sample of advanced countries over 1990:Q1–2015:Q1 period. The results suggest that full-fledged inflation targeting is effective in boosting stock market returns and reducing volatility.

Suggested Citation

  • Dridi, Ichrak & Boughrara, Adel, 2021. "On the effect of full-fledged IT adoption on stock returns and their conditional volatility: Evidence from propensity score matching," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 179-194.
    • Handle: RePEc:eee:quaeco:v:80:y:2021:i:c:p:179-194
    DOI: 10.1016/j.qref.2021.02.007
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    More about this item

    Keywords

    Full-fledged inflation targeting; Propensity score matching; Stock market returns; Conditional volatility;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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