THE ROLE OF INFLATION TARGETING ON EXCHANGE RATE VOLATILITY: AN EVIDENCE FROM PROPENSITY SCORE MATCHING APPROACH

This study examines the treatment effects of inflation targeting on exchange rate volatility across a large panel 91 (36 targeting) countries over 1985-2019 period annual basis. We apply propensity score matching methods to developed, developing, and high-income non-inflation countries. Our results reveal that, average, adopting policy exerts lower in all sample developing economies. However, subgroups demonstrate that regimes may lead higher developed The outcome from different degrees flexibility rates points out regime has significant under free-floating however this stance no discernible effect floating regimes. Additionally, adopted are affected by less damage than those