Towards External Debt Reduction through Inflation Targeting: An Empirical Evaluation of Middle-income Countries
Towards External Debt Reduction through Inflation Targeting: An Empirical Evaluation of Middle-income Countries
Author(s): Abdelhamid Moustabchir, Hicham El Ouazzani, Hicham Ouakil, Augustin Foster ChabossouSubject(s): National Economy, Supranational / Global Economy, Micro-Economics, Economic policy, Public Finances, Socio-Economic Research
Published by: Vysoká škola ekonomická v Praze
Keywords: Inflation targeting; external debt; middle-income countries; propensity score matching; macroeconomic policy;
Summary/Abstract: This study analyses the impact of inflation targeting on the external debt of middle-income countries using the propensity score matching (PSM) method. The results indicate that the adoption of inflation targeting is associated with a significant decrease in external debt, with an average reduction estimated at approximately 15.16 percentage points. This reduction reflects the enhanced credibility of monetary policy, which lowers the risk of default on public debt. These findings suggest that inflation targeting can be a useful tool for managing external debt and reducing fiscal pressures on public finances, but its effectiveness depends on its integration within a broader economic policy framework tailored to each country’s specific conditions.
Journal: Politická ekonomie
- Issue Year: 74/2026
- Issue No: 2
- Page Range: 357-382
- Page Count: 26
- Language: English
