Anchoring inflation expectations increases FDI – research
Adopting inflation targeting also increases investment, researchers find
Prudent fiscal and monetary policy is an “essential driver” of foreign direct investment (FDI), research published in the Latin American Journal of Central Banking finds.
Authors Helder Ferreira de Mendonça and Bruno Pires Tiberto analyse data from 75 emerging market and developing economies (EMDEs) from 1990 to 2019.
They define “prudent” macroeconomic policy as the ability of the central bank to anchor inflation expectations to its target, and public debt solvency.
Credible monetary policy and
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