know what short - run stance of policy would be appropriate for the future. the purest examples of such rules are a fixed exchange rate and a fixed rate of growth in a monetary aggregate. either rule provides a clear anchor for inflation expectations. a credibly fixed exchange rate is the most transparent nominal anchor. a floating exchange rate with a money growth rule as the nominal anchor is also easy to monitor, if somewhat more difficult to achieve. both anchors suffer, to some extent, from being indirect routes to the real objective of monetary policy, which is price stability. targeting the price level directly, however, was generally considered not possible since the linkages between policy instruments and prices were somewhat uncertain and contained the long and variable lags. these problems led to two new issues which brought about a revolution in the approach to central banking. these are transparency and improved forecasting. clearly, monetary policy is most effective in the presence of a firmly established nominal anchor, and the more understandable that anchor is to the public the better. an effective commitment to long - run price stability is just such a nominal anchor that the target rate of inflation communicates to the public the price level the central bank is aiming to achieve at specified dates in the future. any move away from policy rules for long periods must face and deal with long and variable lags in the economy ’ s response to changes in policy stance. improved modeling and forecasting is giving central banks increasing confidence in basing current policy decisions on expected future outcomes. when we sum up these developments in monetary policy, we need a monetary framework which includes the following components. it should be : • transparent ; • accountable ; • predictable and easy - to - monitor ; and • reliable. this is also why the it ( inflation targeting ) countries introduced these institutional and operational features into their monetary policy frameworks. before passing to the key issues for the success of it regime, i would briefly like to focus on the basic key requirements of the inflation targeting framework in the literature. these are : • the public announcement of medium - term numerical targets for inflation with due advance notice. • the recognition of price stability as the sole objective of monetary policy without other nominal targets. • increased transparency of the monetary policy strategy through communication with the public and the markets about the plans, objectives and decisions of the monetary authorities. • an independent central bank both in the context of the institutional and operational arena. • development of appropriate policy instruments and a clear understanding of the underlying monetary policy transmission

gazi ercel : focus on inflation targeting opening remarks by mr gazi ercel, governor of the central bank of the republic of turkey, made at the conference on inflation targeting which was organized by the central bank of the republic of turkey in ankara on 19 october 2000. * * * i am very honored to present the opening remarks at this conference on inflation targeting ( it ) framework. first i would like to extend our appreciation to the lecturers of the conference who came a long way geographically, and considering the state of the economy they reach. the issues that are going to be addressed will be of great interest, particularly for developing and dis - inflating countries. the attendance of so many speakers from the central banks and international institutions is particularly motivating. this conference will review the country experiences on inflation targeting, particularly touching on the best ways to design policy objectives, responses, and implementation issues. some papers will consider not only inflation targeting framework, but also the case of economies during the shift to low inflation. let me begin my remarks by focusing on a framework that has been widely validated among academics and policymakers during the last 10 years. inflation targeting is an innovative approach to monetary policy being applied by a growing number of central banks of not only industrial but also emerging market countries of the world. now, more than ever, businesses are operating in a rapidly changing world. even the marginal uncertainties have become important. rapid changes in technologies, globalization and increasing competition are the challenges of the day for the business community. in the dynamic economic environment of the 1990s, business communities have been taking not only the risks of their new investments on technology, but the risk of inflation as well. in an inflationary environment, businesses and individuals end up spending more time and money either protecting themselves against inflation or trying to benefit from it. the rapidly changing environment affected not only the business decisions but the monetary polices as well. the traditional anchors for monetary policy and of central bank accountability - exchange rate targets and money aggregate targets - have fallen victim to liberalized capital mobility, inter - dynamic markets namely, by the introduction of new financial instruments, technology, financial globalization, and as a result unstable money demand. at this juncture, the role of the central banks and the framework of the monetary policy needed to be drawn more clearly. the ultimate goal of monetary policy has become reasonable price stability, which is generally understood to point the inflation at rates low enough not to affect economic decisions. thus,