Central Bank inflation targeting regime and its effect on inflation: Teorical and ampirical analysis

Inflation is a phenomenon with a history of more than 18 centuries. The first inflation occurred as a result of the depreciation of the coins in the Roman period. In the last century, it was accepted that inflation was an economically disturbing event. In this study, the effect of exchange rate changes on inflation is examined. Turkey is a country that is exposed to high inflation bitter pill for many years. Turkey left open capital account liberalization process and in the face of world money has allowed the Turkish lira to be convertible. This is why ensuring stability in the exchange rate to be successful in fighting inflation in Turkey is very important. Since 1977, Turkey has entered a sustained period of high inflation implement inflation targeting regime since 2006. In this concept, it is analyzed the success of inflation targeting regime over inflation expectations, the role of money supply in this regime, moreover the situation of the real inflation compared to inflation target. Key Words: Inflation targeting, interest expectation, exchange rate, inflation, central bank, money supply