Monetary Policy is an important determinant of social welfare. Currently the dominant strategy to deliver these favorable outcomes in high developed countries with low and stable inflation is direct inflation targeting (IT) strategy with implicitly or explicitly defined inflation target. The strategy turned out to be successful in controlling inflation, in anchoring inflation expectations and in stabilizing real output fluctuations. Nevertheless, the crisis from the year 2007-2009 indicated that certain important elements of this strategy need rethinking or even modifications. Especially relevant in this matter seems to be the analyses of the importance of money supply, which role as a determinant of central banks’ decision have been before the crisis strongly depreciated. The goal of the research project is to evaluate the efficiency of the IT strategy, to analyze the importance of money in this strategy, the role of financial stability and the relations between monetary and fiscal policy in countries with implemented IT strategy. 

Principal investigator: Maciej Ryczkowski, PhD