Pre conditions of inflation targeting

Abstract

Inflation targeting regime is appeared as a new approach to achieve price stability objectives of the central banks. It is started be used at the beginnings of 1990’s. Inflation targeting regime is based on an inflation target that is defined and announced to public. This regime has changed some structures of central banks. Central bank credibility became more important. Transparency came into prominence, therefore central banks started to give closer attention to communication strategies. This paper aims to define pre conditions of inflation targeting together with the history of Turkish economy to set light on the conditions that carry Central Bank of the Republic of Turkey to choose inflation targeting regime. After communication strategies are defined and communication strategies of different central banks are compared in this paper. As being one of the inflation targeting central bank, Central Bank of the Republic of Turkey is subjected to review and advices are given to improve its communication strategies to become more effective in applying inflation targeting regime.