Is Inflation Targeting the Best Policy Choice for Emerging Economies? A Survey of Emerging Market Experiences and Lessons for Pakistan

In the aftermath of a major financial crisis in the 1990s, price stability has become an important argument of the future monetary policy stance in many emerging economies. As such, emerging economies in Asia and Latin America have switched to inflation targeting as their monetary policy. This paper serves as a survey of the experiences of emerging countries in adoption to inflation targeting. In view of the recent successful experience of some emerging economies, the paper focuses on inflation targeting as a choice of policy regime for Pakistan. The discussion and analysis in this paper suggests that it is probably a good time for policy-makers in Pakistan to consider inflation targeting as monetary policy strategy. © 2006 by the State Bank of Pakistan. All rights reserved.