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On the effect of full-fledged IT adoption on stock returns and their conditional volatility: Evidence from propensity score matching

Ichrak Dridi and Adel Boughrara

The Quarterly Review of Economics and Finance, 2021, vol. 80, issue C, 179-194

Abstract: Applied research on central banking has attempted to assess the effects of adopting full-fledged inflation targeting on several macroeconomic variables, while the impact of financial variables has been under-researched so far. This paper fills this gap by assessing and quantifying the effect of full-fledged inflation targeting on stock returns and their conditional volatility. For this purpose, it implements the Propensity Score Matching (PSM), which is immune against reverse-causality, self-selection and omitted-variable biases, on a sample of advanced countries over 1990:Q1–2015:Q1 period. The results suggest that full-fledged inflation targeting is effective in boosting stock market returns and reducing volatility.

Keywords: Full-fledged inflation targeting; Propensity score matching; Stock market returns; Conditional volatility (search for similar items in EconPapers)
JEL-codes: C14 C40 E52 G20 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:80:y:2021:i:c:p:179-194

DOI: 10.1016/j.qref.2021.02.007

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