This study reviews the literature on the contribution of low inflation
to economic growth and the subsequent widespread adoption of inflation
targeting as a monetary policy framework. Edwin Truman addresses the
challenges and risks associated with such a framework. Building on these
foundations, the study focuses on two major international economic
policy issues: (1) the implications of differing national regimes of
inflation targeting for international economic policy cooperation; and
(2) the adoption of inflation targeting by emerging-market economies
which often lack stable monetary policy environments and credible policy
authorities--a situation which, among other things, can complicate the
use of the inflation targeting framework as the basis for IMF-supported
stabilization programs.