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DOES INFLATION TARGETING MATTER FOR FOREIGN PORTFOLIO INVESTMENT: EVIDENCE FROM PROPENSITY SCORE MATCHING

ADEL BOUGHRARA|ICHRAK DRIDI
경제연구소 (Hanyang Economic Research Institute)|2017.06|Journal of Economic Development|제42권 제2호|pp. 67-86|DOI 10.35866/caujed.2017.42.2.005

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참고문헌

키워드

Propensity Score MatchingInflation TargetingPortfolio InvestmentEmerging Market Countries
주제분류경제학

초록

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.

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.

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