Assia ATIL

This thesis aims to study the role of monetary policy in controlling inflation rates in developing countries during the period 1993-2019.

To achieve this objective, we used the descriptive approach and statistical and econometric methods by constructing a Fixed Effects model on panel data from 33 developing countries to measure the impact of public expenditure and money supply on inflation. Then, in a second step, we moved on to the study of the impact of the adoption of inflation targeting on the volatility of inflation, economic growth, and public expenditure through the approach of differences in differences (DID).

Empirical results have shown the existence of statistically significant positive fixed effects, moving from government spending to inflation. This confirms the contribution of expansionary fiscal policies in explaining inflationary pressures. On the other hand, compared to non-target countries the difference in differences findings have demonstrated a significant and negative average treatment on the treated (ATT) which proved the importance of inflation targeting to achieve the minimum and stable inflation rates in targeter countries. In return, the findings have also shown that no significant effect of inflation targeting on either economic growth or public spending