Theory and Evidence of the Inflationary Targets Regime

ABSTRACT This article shows that the theory that supports the inflation targeting regime does not have a relationship with reality. Moreover, this stresses that monetary policy should be used to full capacity because it not only controls inflation, but is also useful to achieve real goals, such as employment. The article shows that there is no evidence that the regime reduced inflation in the 1990’s. Developed countries which adopted the regime and developed countries which did not adopt inflation targeting regime have both reduced and kept inflation under control.