Politická ekonomie 2026, 74(2)  | DOI: 10.18267/j.polek.1490

Towards External Debt Reduction through Inflation Targeting: An Empirical Evaluation of Middle-income Countries

Abdelhamid Moustabchir ORCID..., Hicham El Ouazzani ORCID..., Hicham Ouakil ORCID..., Augustin Foster Chabossou ORCID...
Abdelhamid Moustabchir, Faculty of Law, Economic and Social Sciences, Ain Chock, Hassan II University, Casablanca, Morocco
Hicham El Ouazzani (corresponding author), Faculty of Economics and Management, Ibn Tofail University, Kenitra, Morocco; Observatoire de la Francophonie Économique (OFE), Montreal University, Montreal, Canada
Hicham Ouakil, Faculty of Economics and Management, Ibn Tofail University, Laboratory of Economics, Finance, Management, and Innovation, Kenitra, Morocco
Augustin Foster Chabossou, Faculty of Economics and Management, University of Abomey-Calavi, Abomey-Calavi, Benin

This study analyses the impact of inflation targeting on the external debt of middle-income countries using the propensity score matching (PSM) method. The results indicate that the adoption of inflation targeting is associated with a significant decrease in external debt, with an average reduction estimated at approximately 15.16 percentage points. This reduction reflects the enhanced credibility of monetary policy, which lowers the risk of default on public debt. These findings suggest that inflation targeting can be a useful tool for managing external debt and reducing fiscal pressures on public finances, but its effectiveness depends on its integration within a broader economic policy framework tailored to each country's specific conditions.

Keywords: Inflation targeting, external debt, middle-income countries, propensity score matching, macroeconomic policy
JEL classification: C14, E52, E61, F34, O57

Received: April 30, 2024; Revised: January 5, 2025; Accepted: January 14, 2025; Prepublished online: November 7, 2025; Published: April 28, 2026  Show citation

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Moustabchir, A., El Ouazzani, H., Ouakil, H., & Foster Chabossou, A. (2026). Towards External Debt Reduction through Inflation Targeting: An Empirical Evaluation of Middle-income Countries. Politická ekonomie, 74(2), 329-354. doi: 10.18267/j.polek.1490
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