Inflation targeting and firm performance in developing countries

Bao-We-Wal Bambe, Jean-Louis Combes, Kabinet Kaba and Alexandru Minea

Journal of Economic Dynamics and Control, 2024, vol. 163, issue C

Abstract: Using a panel of 31,027 firms in 47 developing countries over the period 2006-2020, this paper looks at the effects of inflation targeting on firm performance. Estimations performed using entropy balancing to address endogeneity in policy adoption reveal that inflation targeting significantly increases firm performance, mainly measured by sales growth and productivity growth. This effect is robust to a wide range of tests (including alternative models, measures, and samples), and may vary under different macroeconomic and firms' structural characteristics. Lastly, by looking at possible transmission channels, we reveal that these favorable effects seem related with the capacity of the inflation targeting framework to reduce macroeconomic instability.

Keywords: Inflation targeting; Firm performance; Sales growth; Productivity growth; Macroeconomic (in)stability (search for similar items in EconPapers)
JEL-codes: D22 E31 E42 E52 E58 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:163:y:2024:i:c:s0165188924000460

DOI: 10.1016/j.jedc.2024.104854

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