Sovereign debt risk in emerging market economies: Does inflation targeting adoption make any difference?

Hippolyte Balima, Jean-Louis Combes and Alexandru Minea

Journal of International Money and Finance, 2017, vol. 70, issue C, 360-377

Abstract: Based on a sample of 38 emerging economies, we find that inflation targeting (IT) adoption improves sovereign debt risk. Next, we show that this favorable effect is sensitive to several structural characteristics, and to the considered time span. Finally, the measure of sovereign risk (sovereign debt ratings or government bond yield spreads) and the IT form (full-fledged or partial) equally influence the effect of IT adoption on sovereign debt risk. Thus, our paper provides valuable insights regarding IT implementation as a device for improving emerging market economies' access to international financial markets.

Keywords: Inflation targeting; Sovereign debt ratings; Government bond yield spreads; Emerging markets; Propensity scores matching (search for similar items in EconPapers)
JEL-codes: E44 E58 F34 G15 H63 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:70:y:2017:i:c:p:360-377

DOI: 10.1016/j.jimonfin.2016.10.005

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