Transition to Inflation Targeting Regime in Azerbaijan

Student: Emin Rasulzade

Educational Programme: Economic Analysis (Master)

Year of Graduation: 2023

In this paper, based on the analysis of thematic literature, a loss function was proposed to assess the effectiveness of the monetary policy pursued by the Central Banks. Then, on the basis of this function, an assessment was made of the effectiveness of the monetary policy of countries using the inflation targeting mechanism. It was concluded that the application of the IT mechanism leads both to a decrease in inflation during a period of price stability of key export commodity, and the loss function itself. Based on a review of the process of transition of the countries participating in the study to the IT regime, an assessment of the situation in Azerbaijan was carried out, have proposed recommendations on the introduction of a hybrid inflation targeting mechanism in the country.

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