Theoretical and Practical Foundations of Inflation Targeting with Special Emphasis on the Experience of Serbia

Compared to the 1970s when the inflation rate in most countries reached double digits, nowadays we are facing low inflation rates globally. Inflation targeting, as a monetary policy strategy, appeared in late 1980s in the period when other strategies proved to be insufficiently effective. The first country to apply inflation targeting in 1989 was New Zealand. Since then, 64 countries have implemented the inflation targeting as a monetary policy regime. The concept of inflation targeting as a strategy for conducting monetary policy in Serbia was introduced in August 2006. When choosing the appropriate strategy to ensure price stability, the NBS relies on the experiences of other countries, especially Central and Eastern European countries. Accordingly, the paper aims to present the genesis of the development of the inflation targeting, as well as the impact of applying this strategy on reducing global inflation. A special segment of this paper is devoted to the analysis of the experiences of Serbia in terms of applying the inflation targeting