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Does inflation targeting improve fiscal discipline?

  • Minea, Alexandru
  • Tapsoba, René

We explore the performances of inflation targeting (IT) adoption in terms of fiscal discipline (FD), while most existing studies focus exclusively on the role of FD as a precondition for IT adoption. Using a sample of developing and developed countries, we show that IT adoption exerts a positive and significant effect on FD, a result robust to a wide variety of alternative specifications. In addition, this effect is statistically significant only in developing countries, a result that may fuel the current debate regarding the relevance of IT adoption in general, and particularly for developing countries.

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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 40 (2014)
Issue (Month): C ()
Pages: 185-203

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Handle: RePEc:eee:jimfin:v:40:y:2014:i:c:p:185-203
DOI: 10.1016/j.jimonfin.2013.10.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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