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Does inflation targeting cause financial instability?: An empirical test of paradox of credibility hypothesis

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  • Musa, Umar
  • Jun, Wen

Abstract

•This study investigates if the worldwide adoption of IT causes financial instability.•We use composite indexes of financial instability.•Empirical results using dynamic panel estimators and non-parametric approaches support “the paradox of credibility hypothesis.”•Global liquidity and central bank supervision are the main channels through which IT causes financial instability.

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  • Musa, Umar & Jun, Wen, 2020. "Does inflation targeting cause financial instability?: An empirical test of paradox of credibility hypothesis," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:ecofin:v:52:y:2020:i:c:s1062940820300619
    DOI: 10.1016/j.najef.2020.101164
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