Research of Inflation Targeting Regime Indirect Effects on Foreign Direct Investment

Student: Kopytok Vitovt

Educational Programme: Economics (Bachelor)

Final Grade: 10

Year of Graduation: 2016

This paper investigates the effect of inflation targeting adoption over foreign direct investments dynamics using a wide control group. We refer to the adoption of inflation targeting as a treatment, to the IT countries as a treated group and to the non–IT countries as a control group. Based on the panel date of more than 130 developing and developed countries over the period since 1980 to 2014, we directly evaluate the effect of inflation targeting by implementing a variety of propensity score matching methods. We find no evidence that the IT adoption enhances foreign direct investments inflows. Indeed, the average treatment effect is small and insufficient. This result is robust to the alternative definitions of the adoption dates and matching methods.

Full text (added May 12, 2016)

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