Does Inflation Targeting Matter for Attracting Foreign Direct Investment into Developing Countries?
AbstractThis paper investigates the effect of Inflation Targeting (IT) on Foreign Direct Investment (FDI). Based on panel data of 53 developing countries over the period 1980-2007, this study is the first, to the best of the author's knowledge, to evaluate directly the effect of IT on FDI. Using a variety of propensity scores-matching methods which allow controlling for selfselection in policy adoption, it finds that the treatment effect of IT on FDI is positive, statistically significant and robust to a set of alternative specifications. In terms of policy recommendations, this finding therefore suggests that if well implemented, IT adoption can be a legitimate part of the policy toolkit available to policymakers in developing countries in their competition to attract more FDI.
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Date of creation: 07 Feb 2012
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Inflation Targeting; foreign direct investment; Propensity Scores-Matching; Developing Countries.;
Other versions of this item:
- René TAPSOBA, 2012. "Does Inflation Targeting Matter for Attracting Foreign Direct Investment into Developing Countries?," Working Papers 201203, CERDI.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
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