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Inflation targeting adoption and institutional quality: Evidence from developing countries

Author

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  • Alexandru Minea

    (LEO - Laboratoire d'Économie d'Orleans [2021-2022] - UO - Université d'Orléans - UT - Université de Tours)

  • René Tapsoba
  • Patrick Villieu

Abstract

Institutional quality is often emphasised as an engine of economic development in developing countries. However, most of the literature assumes that institutions are exogenous. In this paper, we adopt the opposite view, and study the way the design of the monetary regime, and specifically the adoption of an inflation targeting regime, can impact the quality of institutions. Using the propensity scores matching method, which allows controlling for self‐selection in policy adoption, along with a wide set of robustness checks, including GMM‐based estimations and controlling for unobserved heterogeneity, we find that the adoption of inflation targeting significantly improves the quality of institutions.
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Suggested Citation

  • Alexandru Minea & René Tapsoba & Patrick Villieu, 2021. "Inflation targeting adoption and institutional quality: Evidence from developing countries," Post-Print hal-03557876, HAL.
    • Handle: RePEc:hal:journl:hal-03557876
    DOI: 10.1111/twec.13074
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    Cited by:

    1. Apeti, Ablam Estel & Combes, Jean-Louis & Minea, Alexandru, 2024. "Inflation targeting and fiscal policy volatility: Evidence from developing countries," Journal of International Money and Finance, Elsevier, vol. 141(C).
    2. Petrevski, Goran, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," EconStor Preprints 271122, ZBW - Leibniz Information Centre for Economics.
    3. Dorian Balvir, 2024. "Fiscal rules: the imitation game," Applied Economics, Taylor & Francis Journals, vol. 56(6), pages 708-727, February.
    4. Bambe, Bao-We-Wal, 2023. "Inflation targeting and private domestic investment in developing countries," Economic Modelling, Elsevier, vol. 125(C).
    5. Bambe, Bao-We-Wal & Combes, Jean-Louis & Kaba, Kabinet & Minea, Alexandru, 2024. "Inflation targeting and firm performance in developing countries," Journal of Economic Dynamics and Control, Elsevier, vol. 163(C).
    6. Noda, Hideo & Fang, Fengqi, 2025. "Public Investment Financed by Seigniorage, Money Supply Control and Inflation Dynamics in Sub-Saharan African Countries," MPRA Paper 125632, University Library of Munich, Germany.
    7. Stojanovikj, Martin & Petrevski, Goran, 2024. "The choice of monetary regimes in emerging market economies: Inflation targeting versus its alternatives," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 237-260.
    8. Mbassi, Christophe Martial & Samba, Cyrille Michel & Elomo Zogo, Thérèse, 2025. "Does monetary policy fuel energy consumption across the world? Focus on inflation targeting," Energy Economics, Elsevier, vol. 145(C).
    9. Ablam Estel Apeti & Bao We Wal Bambe & Jean-Louis Combes, 2025. "On the macroeconomic effects of fiscal reforms: fiscal rules and public expenditure efficiency," Public Choice, Springer, vol. 205(1), pages 19-47, October.
    10. Yildirim Beyazit Cicen, 2024. "Decoding Inflation: Role of Institutional Quality in Türkiye Using Advanced Econometric Techniques," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 73(74-1), pages 1-35, June.
    11. Apeti, Ablam Estel & Combes, Jean-Louis & Minea, Alexandru, 2023. "Inflation targeting and the composition of public expenditure: Evidence from developing countries," Journal of Macroeconomics, Elsevier, vol. 76(C).
    12. Petrevski, Goran, 2023. "Determinants of Inflation Targeting: A Survey of Empirical Literature," EconStor Preprints 271121, ZBW - Leibniz Information Centre for Economics.
    13. El Ouazzani Hicham & Ouakil Hicham & Moustabchir Abdelhamid & Elhebil Abdelaziz, 2025. "Impact of Inflation Targeting on External Debt: Evidence from Low-Income Countries," Folia Oeconomica Stetinensia, Sciendo, vol. 25(1), pages 114-136.
    14. Bao-We-Wal BAMBE, 2022. "Inflation Targeting and Private Domestic Investment in Developing Countries," Working Papers REM 2022/0237, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    15. Bram Gootjes & Jakob Haan & Richard Jong-A-Pin, 2021. "Do fiscal rules constrain political budget cycles?," Public Choice, Springer, vol. 188(1), pages 1-30, July.
    16. Bao-We-Wal Bambe, 2023. "Inflation Targeting and Private Domestic Investment in Developing Countries," Post-Print hal-04227639, HAL.
    17. Kadria, Mohamed & Ben Aissa, Mohamed Safouane, 2016. "Inflation targeting and public deficit in emerging countries: A time varying treatment effect approach," Economic Modelling, Elsevier, vol. 52(PA), pages 108-114.
    18. López-Herrera, Carmen & Cordero, José M. & Pedraja-Chaparro, Francisco & Polo, Cristina, 2023. "Fiscal rules and their influence on public sector efficiency," MPRA Paper 119018, University Library of Munich, Germany.

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