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Can Tunisia Move To Inflation Targeting?

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  • Adel BOUGHRARA

Abstract

Inflation targeting has become an alternative monetary strategy that has been followed by many industrial and emerging countries. This study considers whether the adoption of inflation targeting would be relevant for Tunisia. More specifically, this paper aims at checking whether the necessary conditions for the successful implementation of such a strategy are fulfilled or not. It is found that fiscal dominance does not constitute the main hindrance to the adoption of inflation targeting. Other impediments have been identified, especially a weak financial system in general, the unsound and fragile banking system in particular, and the glaring lack of knowledge about the monetary transmission mechanism. Furthermore, it has been pointed out that if Tunisian monetary authorities continue to carry out the present exchange rate regime, namely, the constant real exchange rate rule, an inflation targeting regime will not be sufficient to properly contain the inflation pressures caused by demand shocks.

Suggested Citation

  • Adel BOUGHRARA, 2007. "Can Tunisia Move To Inflation Targeting?," The Developing Economies, Institute of Developing Economies, vol. 45(1), pages 27-62, March.
    • Handle: RePEc:bla:deveco:v:45:y:2007:i:1:p:27-62
    DOI: 10.1111/j.1746-1049.2007.00029.x
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    References listed on IDEAS

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    1. Nora Abu Asab & Juan Carlos Cuestas, 2021. "Towards adopting inflation targeting: The credibility and limitations of monetary policy under the fixed exchange system—the case of Jordan," The World Economy, Wiley Blackwell, vol. 44(1), pages 262-285, January.
    2. Kamel Helali & Maha Kalai, 2015. "Exchange rate pass-through to domestic prices in Tunisia: a short- and long-run analysis," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 8(3), pages 282-301.
    3. Ben-Salha, Ousama & Jaidi, Zied, 2014. "Some new evidence on the determinants of money demand in developing countries – A case study of Tunisia," The Journal of Economic Asymmetries, Elsevier, vol. 11(C), pages 30-45.
    4. Adnen Chockri & Ibticem Frihka, 2011. "La portée de la politique de ciblage d’inflation: Approche analytique et empirique pour le cas Tunisien," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 91-111, March.

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