Policy of Inflation Targeting in the Presence of Budget Deficits and Hyperinflation: Difference-in-Differences Estimation

Olfa Manai Daboussi () and Amel Hedhli ()
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Olfa Manai Daboussi: Central University-Tunis
Amel Hedhli: ISG of Tunis-University of Tunis

A chapter in Regional Studies on Economic Growth, Financial Economics and Management, 2017, pp 79-89 from Springer

Abstract: Abstract The majority of macroeconomic theories assume that budget deficits are the causes of macroeconomic instability and inflation. With the implementation of the inflation targeting strategy, this relationship was limited and sometimes it has not been empirically justified in emerging countries. In this paper, our aim is to show the effect of the inflation targeting policy on inflation or hyperinflation, economic growth and budget deficits. In empirical work, we use a sample of 50 emerging economies, which 30 countries are not yet adopted inflation targeting and 20 countries that adopt this strategy for the period 1980–2014. The findings show that inflation targeting contributes to the reduction of hyperinflation and budget deficits in emerging countries.

Keywords: Budget deficits; Hyperinflation; Difference-in-differences estimation; Inflation target; Emerging economies (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:eurchp:978-3-319-54112-9_6

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DOI: 10.1007/978-3-319-54112-9_6

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