The affects of inflation targeting of Central Bank on macroeconomic variables

The high rated inflation is one of the most important problems especially raised in developing economies. In order to solve this problem, several different policies have been applied in many countries including Turkey. While these applications in some countries became successful, but some other didn?t. Inflation targeting is a policy, which has been used by many countries in recent years for the purpose of anti-inflation struggle. The purpose of this policy is targeting the inflation rate for a specific future period and managing other policies in accordance with this purpose and so that achieving the targeted inflation rate. The precondition for the success of inflation targeting is the independence of Central Bank. However, existence of full support of the government to the inflation targeting program and usage of its fiskal policies for achieving this target are required. Another condition required for the success of inflation targeting, is to inform the people regarding the applied inflation targeting and existence of their support.In this study, affects of the inflation targeting of Central Bank on macro economıc variables was analyzed. The study consists of three sections. In the first section, the development of Central Banking, the purpose, mission, target and authorities of Central Banks, the functions and subjects and money policies of Central Banks,and relation between inflation and macro economıc variables were analyzed. In the second section, inflation targeting and evaluation of Turkey, the definition of inflation targeting and its place in money policy, the reasons for inflation targeting, the characteristics of inflation targeting, the preconditions of inflation targeting, phases of inflation targeting, conditions required for the success of inflation targeting, advantages and disadvantages of inflation targeting, inflation targeting applications in the developed and developing countries, evaluation of inflation targeting regarding the situation of Turkey economıc were examined. In the third section, the affects of the inflation targeting of Central Bank between 2002-2010 on Gross Domestic Product, External National Debt, Internal National Debt, employment, IMKB(Istanbul Stock Exchange Market) trading volume, public sector borrowing requirement, deposit rate,export, import,portfolio investment and exchange rate was analyzed in accordance with regression analysis. As a result of the analysis, it has been understood that inflation targetig has an increafing effect on the macro economic variables.Key Words: Inflation Targeting, Macro Economic Variables, Regression Analysis.