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Inflation Targeting and Private Domestic Investment in Developing Countries

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  • Bao-We-Wal Bambe

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne)

Abstract

This paper analyses the effect of inflation targeting on private domestic investment in developing countries. Using the propensity scores matching method, which allows addressing the self-selection bias in the policy adoption, I find that inflation targeting has increased private domestic investment from 2.05 to 2.53 percentage points in targeting countries compared to nontargeting countries. The estimated coefficients are economically meaningful and robust to a battery of econometric tests and alternative specifications. Finally, I highlight several heterogeneities in the effect of inflation targeting, depending on various factors.

Suggested Citation

  • Bao-We-Wal Bambe, 2021. "Inflation Targeting and Private Domestic Investment in Developing Countries," Working Papers hal-03479679, HAL.
    • Handle: RePEc:hal:wpaper:hal-03479679
    DOI: 10.1016/j.econmod.2023.106353
    Note: View the original document on HAL open archive server: https://uca.hal.science/hal-03479679
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    More about this item

    Keywords

    E51; E52; E58; 590; E62; E220; Inflation targeting; Private domestic investment; Developing countries; Propensity score matching;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • 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
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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