Analysis of inflation targeting framework

Abstract

Inflation targeting framework has been popular since its adoption by New Zealand in 1990 as the monetary policy framework. Since then, a total of 28 developed and developing countries have adopted inflation targeting. The aim of this study is to analyze the key aspects of inflation targeting and its impact on the key macroeconomic variables including inflation rates, exchange rates, unemployment and GDP growth rates. It also analyses the key aspects in which the impact of inflation targeting differs between the developed and developing countries. Finally, the paper analyses the idea of adoption of inflation targeting framework by India and provides critical recommendations.