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

Adel Boughrara | Zendy; Ichrak Dridi | Zendy

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

Author(s) -

Adel Boughrara,

Ichrak Dridi

Publication year - 2017

Publication title -

journal of economic development

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.178

H-Index - 3

eISSN - 2636-0578

pISSN - 0254-8372

DOI - 10.35866/caujed.2017.42.2.005

Subject(s) - propensity score matching , economics , portfolio , matching (statistics) , inflation (cosmology) , econometrics , investment (military) , monetary economics , financial economics , medicine , physics , theoretical physics , political science , law , pathology , politics

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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