Inflation targeting in theory and practice and inferences for Turkey

ivABSTRACTSince the introduction of inflation targeting regime in 1990 by New Zealand, itbecame a hope of success for the countries which failed to control inflation by using monetaryaggregates, exchange rates and nominal GDP growth as nominal anchor for their monetarypolicy.Turkey intends to stop the inflationary process between 1970 and 2000 by using thisnew application of monetary policy. The ?implicit? inflation targeting which implementedafter the crisis in February 2001 has become a predatory fundament for explicit inflationtargeting regime. The Turkish Central Bank announced that explicit inflation targeting will beintroduced at the begin of 2006.The goal of this paper is to study the sustainability of inflation targeting which willbe carried out in Turkey with all the rules and regulations.In this paper, alternative nominal anchor applications for monetary policy andinflation targeting as a nominal anchor operation has been discussed on conceptual basis.Inflation targeting experiences of New Zealand, Chile and Brazil and the inflationary processin Turkey has been summarized. At the end, the paper focuses on the prospect of successfulimplementation of inflation targeting in Turkey.