Efficiency of Inflation Targeting in Transition Countries

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Several emerging-market economies adopted inflation targeting (IT) as a new exciting monetary strategy directly focusing on inflation as its only goal. The Czech Republic was not the exemption. Transitional process brought about pressures on the exchange rate and on domestic inflation in the early years of the country's transformation. This resulted in indefensibility of monetary targeting regime, used in the early years of transformation. After introducing IT in 1998, some analysts and politicians doubted about effectiveness of the IT framework in the new market environment. This book therefore examines Czech experience with IT. It tries to assess empirically character of deviations from inflation targets throughout the time. It emphasises the crucial role of monetary authorities in anchoring inflation expectations in line with credible monetary policy, ensuring stability of this regime. The analysis should illustrate whether the IT regime is an appropriate regime for the upcoming period of time, which will end up by the entry in the EMU. This book is addressed to economists and anyone else, who may be interested in inflation targeting issues.