Description

Money targeting (MT) was a highly popular monetary regime among central banks in both industrial and developing countries during the 1980s and 1990s. This paper presents a comprehensive empirical explorat ion of the possible explanations of why countries choose (and abandon) a MT regime. The paper uses a large world panel dataset for treatment and control country gr oups, applies five panel-data estimation techniques for discrete -choice dependent variables, and conducts robustness checks for different control groups and time periods . The paper’s evidence shows that the likelihood of having MT in place declines significantly and robustly with trade openness, financial development, a strong fiscal position, and monetary instability.