Does inflation targeting reduce sovereign risk? Further evidence

Thornton, John;Vasilakis, Chrysovalantis
(2016) Finance Research Letters — Vol. 18, p. 237-241 (2016)

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  • Thornton, JohnBangor University, School of Business
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  • Vasilakis, ChrysovalantisUCLouvain
    Author
Abstract
We examine whether adopting an inflation-targeting regime helps reduce sovereign risk premia in a sample of 64 advanced and developing countries for the period 1985–2012. We address the self-selection problem of policy adoption by applying a variety of propensity score matching methods. The results provide evidence that inflation targeting lowers sovereign risk.
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Thornton, J., & Vasilakis, C. (2016). Does inflation targeting reduce sovereign risk? Further evidence. Finance Research Letters, 18, 237-241. https://doi.org/10.1016/j.frl.2016.04.022 (Original work published 2016)