n African Review of Economics and Finance - Is Zambia ready for inflation targeting?

Volume 7, Issue 2
  • ISSN : 2042-1478
  • E-ISSN: 2410-4906


Since inflation targeting (IT) began about a quarter of a century ago, a number of industrialised and an increasing number of emerging and developing countries have adopted it as a framework for conducting monetary policy. Empirical evidence from developed economies suggests that the framework has been associated with low and stable inflation, and a reduction in inflation volatility. The evidence for African countries and other developing regions is not conclusive. Zambia is contemplating a policy of targeting inflation. This article assesses the readiness of Zambia for IT. We find that a number of preconditions for successful adoption are not fulfilled. Thus, while the idea itself has much merit, IT in an unprepared environment may produce perverse incentives, and complicate both fiscal and monetary policy. It is thus imperative that policy makers in Zambia and elsewhere in the developing world address the preconditions highlighted in this article, before adopting a fully-fledged IT policy.

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