“Can inflation targeting promote institutional quality in developing countries?” with Dr. Alexandru Minea (12/06/2017)

The event will take place at the Faculty of Sociology and Social Work (Panduri Campus), Room 102, starting at 5:00 PM.

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Institutional reforms are a key issue on the current research agenda in different fields. In economics, a rich literature focuses on the link between monetary institutional reforms and fiscal institutional reforms.

The study presented in this seminar aims at revisiting the link between monetary and fiscal reforms. The adoption of a more restrictive monetary regime, such as inflation targeting or appointing a more „conservative” central banker (i.e. which attached a higher importance to the inflation goal, with respect to the other potential goals), leads to a decrease of the inflation rate, and generates an important loss of government resources from seigniorage revenues. Particularly in developing countries, characterized on average by higher inflation rate compared to developed countries, this loss could be rather important, given that in these countries a relatively large share of government resources may come from seigniorage revenues. To compensate this loss, governments may launch fiscal reforms aimed at raising fiscal resources, including through resources dedicated to enhancing the quality of fiscal institutions, with the scope of increasing the degree of collecting of fiscal revenues.

Furthemore, this theoretical result is tested in a macroeconomic environment, using data for developing countries. Drawing upon modern econometric tools employed in the literature devoted to analyzing the effects of monetary reforms consisting of inflation targeting adoption, it is shown that the countries that adopted an inflation targeting monetary framework present, on average, better institutional features (capturing, mostly, the quality of fiscal institutions) compared with countries with comparable observable characteristics, but that did not adopt inflation targeting. This statistically significant difference, confirmed by a wide set of robustness tests, support the conclusion of the theoretical model previously developed.

BIO: Alexandru Minea is professor of economics since 2010 at the University of Auvergne, following the French national competitive exam. In 2011, he was appointed as short-term expert for the Fiscal Affairs Department of the International Monetary Fund (IMF). His research examines the impact of policy mix on economic growth and welfare, the link between monetary systems and institutions, and, more recently, the relation between environment and economic growth. His theoretical and empirical research was published in various academic journals. Currently Alexandru Minea is co-director of the research master “Development Economics” at the School of Economics at the University Clermont Auvergne and coordinator of several PhD students in macroeconomics.

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