The Feasibility of Adopting Inflation Targeting in Malawi : An Empirical Exploration

This study attempts to examine the minimum requirements for adopting an inflation targeting framework in Malawi. First, we examined four pre-requisites of an inflation targeting framework: a fairly long track record of low and stable inflation; a degree of independence; having a sole target; and the existence of a predictable and stable relationship between monetary policy and inflation outcomes. The findings indicate that while the requirement of having a sole target has been satisfied, there are still problems associated with the Reserve Bank of Malawi's independence and the existence of a stable and predictable relationship between monetary policy instruments and inflation in Malawi. Therefore, Malawi has yet to reach a stage where a fully-fledged inflation targeting framework could be incorporated into its overall strategy