Adel Bogari

Correspondence: Adel Bogari, aabogari@bu.edu.sa

Associate Professor, College of Business Administration, Al-Baha University, KSA

pdf (429.77 Kb) | doi: https://doi.org/10.47260/bae/1028

Abstract

This study examines the quality institutions role played in the inflation targeting- financial stability nexus. A sample of 65 developed and developing countries, including 33 inflation-targeting countries (10 developed and 23 developing), and 32 non-inflation-targeting countries (12 developed and 20 developing), during the 1996 - 2020 period. Using Two Step GMM estimation, results show that inflation targeting stimulates financial stability. This positive relationship between inflation targeting and financial stability is proved, regardless of the inflation targeting regime in place; Soft or Full-Fledged. Results from institutional quality variables prove that inflation-targeting countries with poor institutional quality are financially vulnerable, and that for good institutional quality are able to promote financial stability.

Keywords:

  Inflation targeting, Financial stability, Developed and developing countries, Quality of institutions, Tow Step GMM System.

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