Prospects for inflation targeting in the MENA region: feasibility, desirability and alternatives
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Abstract
Inflation targeting (IT) has recently become the dominant monetary policy prescription over
the last decade. Emerging markets governments, in particular, are increasingly pressured to follow
IT as part of their IMF-led stabilization packages and the routine rating procedures of the
international finance institutions. However, the common expectation of IT promoters that price
stability would ultimately lead to macroeconomic stability and sustained growth has failed to
materialize. This paper is an attempt to assess the desirability of the IT regime for a select group of
MENA countries. I also argue that modern central banking ought to have more policy space in
balancing out various objectives and instruments, and that central bank independence' should not be equivalent to central bank
irrelevance.'