MONETARY POLICY OF INFLATION TARGETING AND THE TRANSMISSION MECHANISM– LESSONS FOR CROATIA

Fifteen years have passed since the first acceptance of the infl ation targeting monetary policy in a number of countries. This paper outlines the infl ation targeting monetary policy whilst providing the institutional framework. A special emphasis has been placed on the analysis of the transmission mechanism of the monetary policy and the changes resulting from the European integration process. The common denominator determining the success of the infl ation targeting policy emphasises the need for strong and lasting institutions in order to maintain macroeconomic stability. The experiences and conclusions drawn from the activities of the transmission mechanisms are taken as the basis for the evaluation and consideration of the Croatian transmission mechanism of the monetary policy. All in anticipation of the middle term EU integration period and EMU entry.