Adopting Inflation Targeting: Practical Issues for Emerging Market Countries

Inflation targeting is gaining in popularity among emerging market countries.This has led to an increased demand for technical assistance from the IMF to help these countries meet the practical challenges that they face in adopting this policy regime.This paper summarizes the lessons that can be drawn for emerging market countries on the operational and institutional policy challenges posed by inflation targeting.It is based on industrial countries' experiences with inflation targeting as well as the relatively short experience of emerging market countries.The lessons drawn here can be expected to be refined as the range of country experience with inflation targeting widens.The material in this paper was originally prepared for the information of the IMF's Executive Board in August 2000.The authors are most grateful for the detailed comments and discussions with officials in a number of inflation targeting central banks, notably Kevin Clinton (Bank of Canada), Guy Debelle (Reserve Bank of Australia), Akiva Offenbacher (Bank of Israel), Michael Reddell (Reserve Bank of New Zealand), Klaus Schmidt-Hebbel (Banco Central de Chile), and Roger Clews and Gabriel Sterne (Bank of England).