Twin benefits of inflation targeting : low stable inflation and trust building.

Abstract

The purpose of this paper is to explore the twin benefits of the inflation targeting (IT)2 3regime of macroeconomic monetary policy. With the current discussion within development economics regarding the necessary conditions for sustainable growth focusing on low inflation and effective governmental institutions, the IT framework has become even more properly suited to those states who wish to develop their economy. It is commonly held that IT will likely keep inflation low, but this paper will postulate an additional, perhaps even more important benefit in the area of institutional health.