MONETARY STABILITY AND INFLATION TARGETING
MADALINA NICOLOFABSTRACT. Mariano and Villanueva note that some discussions on inflation targeting suggest that inflation targeting is an alternative framework to monetary targeting. According to Taylor, a monetary policy rule, at its most basic level, is a contingency plan that lays out how monetary policy decisions are, or should be, made; policy rules turned out to be pretty accurate at predicting future interest rates. Bhattacharya says that country-specific studies indicate that switching to inflation targeting (IT) has sometimes been followed by a dramatic reduction in inflation.