مرکز منطقه ای اطلاع رساني علوم و فناوري - IMPLEMENTATION OF INFLATION TARGETING STRATEGY IN TURKEY

Abstract :

After 1970s approximately thirty years Turkey has struggled with high inflation rate. After an unsuccessesful monetary targeting and exchange rate targeting experience Turkey adopted the floating exchange regime on 22 February 2001 and structural transformation process started in the economy. For this purpose significant amendments were made in the Central Bank Law. According to the new law, achieving and maintaining price stability was adoptep as the primary objective of Central Bank. In accordance with the primary objective of price stability, the inflation targeting regime was adopted in 2002. Inflation targeting was implemented between 2002 and 2005 implicitly with an attempt to establish the precondition for full-fledged inflation targeting. Having implemented the preconditions for inflation targeting, Turkey adobted officially “open inflation targeting” in 2006 and has used interest rate as monetary policy instrument until 2010. Rapid cedit growth, short term capital inflows and associated macro-financial risks in the aftermath of the global crisis necessitated the use of new monetary policy instrument. Therefore, Central Bank has been used new policy instrument to ensure financial stability besides price stability since November 2010. The objective of this study is to put out justifications and general framework of inflation targeting which has been implemented in Turkey since 2002.