Can inflation targeting regimes be effective in developing countries? The Turkish experience

► We study the experience of Turkey's inflation targeting regime since 2002. ► We estimate Taylor rule models and also investigate the real business-cycle effects of the inflation targeting regime through employing variance decomposition analyses on Turkish macro variables. ► We find that the successful monetary policy has been mostly achieved through fiscal discipline and improving interest rate pass-through from policy rate changes to commercial lending rates. ► The results also show that the volatilities of output, inflation, and interest rates have all decreased during the inflation targeting period. Hence, inflation targeting has been an effective framework in Turkey.