Implementation Of Inflation Targeting And Budget Deficit Performance In Emerging Countries: A Treatment Effect Evaluation

Abstract

<p>In this paper, we tried to examine whether the implementation of inflation targeting (IT) monetary policy and its discipline character allows reducing the budget deficit in emerging countries. To do this, we used the propensity score matching methodology to evaluate the treatment effect of IT on fiscal discipline, in terms of budget deficit performance, in emerging countries has adopted this monetary policy framework. Our empirical analysis, conducted on a sample of 41 economies (20 IT and 21 non-IT economies) for the period from 1990 to 2010, shows that on average IT adoption has had a considerable and significant effect in reducing the budget deficit. Our results are confirmed by the robustness tests and corroborate the literature of disciplining effects of IT regime on the fiscal discipline.</p>

Inflation targeting and public deficit in emerging countries: A time varying treatment effect approach

“…Thus, the non-ITers will greatly benefit by adopting the IT policy. More recently, Kadria and Ben Aissa (2014) tried to examine whether the implementation of IT monetary policy and its discipline character allow reducing the budget deficit in emerging countries. To do this, they used the propensity score matching methodology to evaluate the treatment effect of IT on fiscal discipline, in terms of budget deficit performance, in emerging countries has adopted this monetary policy framework.…”

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ABSTRACTSeveral studies including Minea, Tapsoba and Villieu (2012) and Lucotte (2012) claim that in emerging countries, the adoption of inflation targeting (IT) monetary policy and its discipline character allow intensifying their efforts to collect tax revenue and/or expenditure rationalization, and allows the reduction of their budget deficits (Kadria and Ben Aissa, 2014). But, the lag in the effect of monetary policy contains vital information for the policy evaluation (Fang and Miller, 2011).

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Avrupa’nin Yükselen Ekonomi̇leri̇nde Bütçe Açiğinin Enflasyon Üzeri̇ndeki̇ Etki̇si̇: Panel Ardl Yaklaşimi

“…Yöntem olarak ARDL sınır testi yaklaşımının kullanıldığı çalışma sonunda, bütçe ağının enflasyonun temel bileşeni olduğu sonucuna ulaşılmıştır. Kadria ve Aissa (2014), 41 ülkede, 1990-2010 yılları arasında, enflasyon hedeflemesi para politikasının uygulanmasının, bütçe açığını azaltmak üzerindeki etkilerini araştırmak üzere eğilim puanı eşleştirme metodolojisini kullanmışlardır. Çalışmanın sonunda, ortalama olarak enflasyon hedeflemenin benimsenmesinin bütçe açığının azaltılmasında önemli bir etkisi olduğunu saptanmıştır.…”

Does the Credible Fiscal Policy Support the Prices Stabilization?

“…Budgetary discipline in terms of the budget deficit performance is used by Kadria and Ben-Aissa (2014). They try to examine whether the implementation of inflation targeting monetary policy and its discipline character allow reducing the budget deficit in emerging countries.…”