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Does Inflation Targeting Matter for Foreign Portfolio Investment: Evidence from Propensity Score Matching

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  • Adel Boughrara and Ichrak Dridi

    (LaREMFiQ Laboratory, High Institute of Commercial Studies (IHEC), University of Sousse)

Abstract

The aim of this paper is twofold. Firstly, it seeks to investigate the nature of the relationship between inflation targeting (hereafter, IT) regime and foreign portfolio investment (hereafter, FPI) inflows. Secondly, it inquires whether IT is able to control for FPI volatility in emerging countries or not. The sample covers the period 1986-2010 and contains 38 emerging countries, of which 13 countries have adopted IT. By addressing the self-selection bias associated to the adoption of IT via a variety of propensity score matching techniques, the paper results show that the adoption of a full-fledged IT increases FPI inflows into emerging countries, but they show no robust results for containing FPI volatility.

Suggested Citation

  • Adel Boughrara and Ichrak Dridi, 2017. "Does Inflation Targeting Matter for Foreign Portfolio Investment: Evidence from Propensity Score Matching," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(2), pages 67-86, June.
    • Handle: RePEc:jed:journl:v:42:y:2017:i:2:p:67-86
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    3. 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.

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    More about this item

    Keywords

    Inflation Targeting; Propensity Score Matching; Portfolio Investment; Emerging Market Countries;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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