Inflation Targeting in the MENA Region: The Cases of Egypt, Turkey and Morocco

Résumé

The transition to an inflation targeting regime represents a pivotal shift for any central bank in shaping its monetary policy framework. This transformation is typically preceded by significant structural changes in the economy, including the development of financial markets, the adoption of fiscal discipline, and the reform of exchange rate regimes, with the transition to floating exchange rates being a critical prerequisite. Initially introduced by New Zealand in 1990, inflation targeting has since gained prominence as a strategy for achieving price stability. While not all developed countries explicitly adopt this regime, the objective of price stability remains a cornerstone of their monetary policies, often integrated alongside other economic goals. For emerging economies, the adoption of inflation targeting has coincided with extensive economic restructuring and reforms. Key reforms include enhancing the independence of central banks, transitioning to more flexible exchange rate regimes, and developing robust capital markets. These changes reflect efforts to meet the institutional and technical prerequisites necessary for the successful implementation of inflation targeting. As a result, many emerging countries have adopted or are preparing to adopt this regime as a credible alternative to monetary targeting and fixed exchange rate frameworks.