Alternative monetary policy strategy to price stability and Turkey

03. Summary High inflation which Turkey experienced in 1970s have brought about important problems in economic and cultural areas. In order to eliminate the high inflation with negative outcomes it has been used various nominal anchor such as monetary targeting and exchange rate targeting. On the one hand strategy based on monetary targeting has not been successfull in terms of securing monetary stability, because of different reasons such as weakening relationship between monetary indicators and in nation. On the other hand, exchange rate targeting also has fallen down as result of various reasons such as international monetary movements. Thus, new nominal anchor efforts has come into agenda. As a result of this efforts inflation targeting which New Zealand putted into practice in 1990 firstly has emerged as an alternative monetary strategy. As a result of falling down of many programs for stabilization need for a new nominal anchor has been perceived in Turkey, too. In this context, it has been declared in the stabilization program prepared in 2001, if the conditions exist, inflation targeting will be putted into practice. In this study, it has been evaluated the concepts of price stability, monetary targeting, exchance rate targeting and inflation targeting in terms of the theory and practice. In the light of this evaluation, different aspects of monetary policies practiced in the past have been examined and which anchor is suitable for Turkey has been debated. In the end, it has been concluded that necessary conditions for inflation targeting in Turkey have not been created yet at this point. Thus it has been argued that as long as existing conditions continue double nominal anchor practicing today, i.e., inflation rate and monetary indicators simultatenously, will be the best suitable strategy for monetary policy. X