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Is inflation targeting or the fixed exchange rate more effective for attracting FDI into developing countries?

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  • Dessie Tarko Ambaw
  • Nicholas Sim

Abstract

This article investigates which monetary policy regime – inflation targeting or the fixed exchange rate – is more effective for attracting FDI inflows into developing countries. Using propensity score matching and the difference-in-differences estimator, we find no evidence that adopting an inflation targeting regime would be more effective than adopting a fixed exchange rate, and vice versa, in encouraging FDI inflows.

Suggested Citation

  • Dessie Tarko Ambaw & Nicholas Sim, 2018. "Is inflation targeting or the fixed exchange rate more effective for attracting FDI into developing countries?," Applied Economics Letters, Taylor & Francis Journals, vol. 25(7), pages 499-503, April.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:7:p:499-503
    DOI: 10.1080/13504851.2017.1340563
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    Cited by:

    1. Niaz Morshed & Mohammad Razib Hossain, 2022. "Causality analysis of the determinants of FDI in Bangladesh: fresh evidence from VAR, VECM and Granger causality approach," SN Business & Economics, Springer, vol. 2(7), pages 1-28, July.
    2. Bruno Pires Tiberto & Helder Ferreira de Mendonça, 2023. "Effects of Sustainable Monetary and Fiscal Policy on FDI Inflows to EMDE Countries," Working Papers Series 575, Central Bank of Brazil, Research Department.

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