Sovereign debt risk in emerging market economies: Does inflation targeting adoption make any difference?

Weneyam Hippolyte Balima (1) , Jean-Louis Combes (1) , Alexandru Minea (1)

1 CERDI - Centre d'Études et de Recherches sur le Développement International

Based on a sample of 38 emerging economies, we find that inflation targeting (IT) adoption improves sovereign debt risk. Next, we show that this favorable effect is sensitive to several structural characteristics, and to the considered time span. Finally, the measure of sovereign risk (sovereign debt ratings or government bond yield spreads) and the IT form (full-fledged or partial) equally influence the effect of IT adoption on sovereign debt risk. Thus, our paper provides valuable insights regarding IT implementation as a device for improving emerging market economies’ access to international financial markets.

Mots clés: Inflation targeting Sovereign debt ratings Government bond yield spreads Emerging markets Propensity

Domaines: Economies et finances

Weneyam Hippolyte Balima, Jean-Louis Combes, Alexandru Minea. Sovereign debt risk in emerging market economies: Does inflation targeting adoption make any difference?. Journal of International Money and Finance, 2017, 70, pp.360-377. ⟨halshs-01426508⟩