Inflation targeting and fiscal policy volatility: Evidence from developing countries

Ablam Estel Apeti, Jean-Louis Combes and Alexandru Minea

Journal of International Money and Finance, 2024, vol. 141, issue C

Abstract: This paper studies the effect of inflation targeting (IT) on fiscal policy volatility. Using data for 83 developing countries over 1985-2020, estimations based on impact analysis methods reveal that IT adoption reduces fiscal policy volatility. This result is robust when using a wide set of alternative specifications related to additional control variables, different samples, alternative measures of the main variables, or alternative estimation methods. Consequently, contributing to the ongoing literature on fiscal policy volatility, our results suggest that reforms of the monetary policy management in the form of IT adoption may provide a useful policy for fighting fiscal discretion towards a reduction of fiscal policy volatility.

Keywords: Inflation targeting; Fiscal policy volatility; Impact assessment; Developing countries (search for similar items in EconPapers)
JEL-codes: E52 E58 E62 E63 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Inflation targeting and fiscal policy volatility: Evidence from developing countries (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:141:y:2024:i:c:s0261560623001973

DOI: 10.1016/j.jimonfin.2023.102996

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