A CRITIQUE ON INFLATION TARGETING

Marjan Petreski

Abstract


The objective of this paper is to offer some critical argumentation on the merits of inflation targeting. The literature on inflation targeting is dominated by the views that it has been a successful strategy in lowering or main- taining the achieved low inflation and in supporting the real economic activity.
Yet, a thorough analysis of the mechanism through which it works might suggest that this performance might be a result of the relatively shock-
free period in the 1990s and 2000s. Moreover, the role of the exchange rate is examined.


Keywords


inflation targeting, exchange rate, output volatility

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References


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