Movements in global capital during the late 1990s and the greater emphasis on price stability led many countries to abandon fixed exchange rate regimes and to design institutions and monetary policies to achieve credibility in the goal of lowering inflation. Such recent developments have brought to the forefront the idea that freely mobile capital, independent monetary policy, and fixed exchange rates form an "impossible trinity." It is possible to have two of these policies, but not all three. Inflation-targeting regimes being adopted by many countries provide a way of resolving this dilemma.

"What tools are available for setting and analyzing monetary policy? World-renowned contributors examine recent evidence on subjects as varied as price-setting, inflation persistence, the private sector's formation of inflation expectations, and the monetary policy transmission mechanism. Stopping short of advocating conclusions about the ideal conduct of policy, the authors focus instead on analytical methods and the changing interactions among the ingredients and properties that inform monetary models. The influences between economic performance and monetary policy regimes can be both grand and muted, and this volume clarifies the present state of this continually evolving relationship." [source : 4e de couv.].

The strength of this book is that it summarises a vast amount of the modern literature in monetary economics. . . the book provides detailed and clear descriptions of monetary models. . . This comprehensive volume is a useful compendium of the monetary economics literature of the second half of the 20th century, which has to a certain extent been over taken by events. Paul Wachtel, Asian-Pacific Economic Literature This well-researched and finely crafted book is a valuable addition to the literature on monetary policy in developing countries. It explains the concepts and tools of monetary policy in a simple manner and discusses how monetary policy works in developing Asia in a historical context within the framework of an outward-oriented development strategy. I am not aware of any other book that covers the organisational and institutional aspects of major central banks in developing Asia. Prema-chandra Athukorala, Australian National University This book elaborates the key concepts, principles and models of inflation and monetary policy and explains how they remain relevant and useful to the design and conduct of monetary policy in developing Asia. In this rapidly growing region, price stability remains important and therefore monetary policy has gained increasing importance. Even while emphasising the importance of the classical approach, the book discusses alternative frameworks and points out areas where a consensus is emerging. The review of the literature is extensive and careful. Along with developing this theme, the book reviews the structure and governance of most central banks in the Asia-Pacific and discusses how they conduct monetary policy to achieve price stability under different monetary policy frameworks. The book fills a gap in the central banking and monetary policy literature and has no close competitors. It should be useful to both students and policymakers in developing Asia. Salim Rashid, University of Illinois, US The 1997 East Asia crisis exposed many economic policy weaknesses in the Asia-Pacific region. In his latest book, Dr Hossain provides students with a refreshing up-to-date reference text on the concepts and principles of money, banking and finance in developing countries which differ in many ways to monetary institutions and practices in developed countries, which conventional monetary textbooks focus on. I thoroughly recommend it. A.P. Thirlwall, University of Kent, UK This timely book reviews the modern literature on inflation and monetary policy, and highlights contemporary issues in the design and conduct of monetary policy for price stability in developing Asia. Akhand Akhtar Hossain surveys the evolution of central banking and provides an introduction to the structure, function and governance of central banks in selected countries in the Asia-Pacific. The author also examines the major theories, models and approaches to inflation and monetary policy, and evaluates monetary policy regimes in selected countries in the Asia-Pacific in a historical context. This eloquent and comprehensible book will prove to be invaluable to undergraduate students on monetary theory and policy as well as banking and financial courses. Researchers exploring monetary policy concepts, principles and case studies will warmly welcome this book, as will policy-makers who have an interest in macroeconomics, monetary and financial policies.

Monetary policy in Yemen is largely rudimentary and ad hoc in nature. The Central Bank of Yemen's (CBY) approach has been based on discretionary targeting of broad money without any clear target to anchor inflation expectations. This paper argues in favor of a new formal monetary policy framework for Yemen emphasizing a proactive and rule-based approach with a greater direct focus on price stability in the context of a flexible management of the exchange rate. Although, as in many developing countries, institutional capacity is a concern, adopting a more formal framework could impel the kind of changes that are required to strengthen the ability of the CBY in achieving low and stable rates of inflation over the medium term.

This book of case studies is a significant contribution to monetary macroeconomics in which country-specific experience and issues in inflation and monetary policy are reviewed and analysed in an historical context. In doing so, the key ideas and views

‘Africa and Economic Policy: Developing a Framework for Policymakers’ aims to fill an important gap in the current literature on economic policy in developing countries. Despite its richness and sophistication, the current economic literature has not yet succeeded in developing a framework for economic policy that is clear and intelligible to policymakers in developing countries, and which is capable of effectively delivering a sustained increase in citizens’ well-being. This ground-breaking study seeks to rectify this problem by suggesting a unique conceptual framework for designing and conducting economic policy in developing countries, particularly those in Africa.

Helmut Wagner University of Hagen, Feithstr. 140, D - 58084 Hagen In the last few years decisive methodological and thematic focal points which are important for practical economic policy have been developed in the theory of monetary and exchange rate policy. This book is concerned with these developments, their assessment and the open questions which have still not been solved. It is divided into four parts. The first part deals with central bank design, the second with strategies of monetary policies and their implementation. Part III is concerned with theoretical aspects of exchange rate policy and monetary union, and part IV with selected issues of monetary and exchange rate policy in developing and transition countries. In the following pages I will provide an 1 overview of the individual articles With the exception of the article by Nobel . Laureate James Tobin, the contributions contained in this book were all introduced and discussed at an academic symposium I organized in Castrop Rauxel on 8 and 9 September 1997. James Tobin agreed spontaneously to my suggestion that he should write a comprehensive article especially for this publication. A short summary of the comments or supplementary papers and of the general discussions will be given in the last section of this book, titled "Conclusion and Supplements". There I will also provide some supplements respecting the issues which were the subject of the greatest amount of debate at the symposium.

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.

This paper identifies the institutional and operational requisites for transitions to floating exchange rate regimes. In particular, it explores key issues underlying the transition, including developing a deep and liquid foreign exchange market, formulating intervention policies consistent with the new regime, establishing an alternative nominal anchor in the context of a new monetary policy framework, and building the capacity of market participants to manage exchange rate risks and of supervisory authorities to regulate and monitor them. It also assesses the factors that influence the pace of exit and the appropriate sequencing of exchange rate flexibility and capital account liberalization.

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