The inflation target provides an organisational framework for the debate on the impact of capital flows and the exchange rate. But good policy does not come from simple one-dimensional rules - it comes from strong institutions, a rigorous policy debate, and a dominant priority given to that rarest element in policymaking - common sense.
References Ball, Laurence (2000), “Policy Rules and External Shocks”, NBER Working Paper 7910. Bharucha, Nargis and Christopher Kent (1998), “Inflation Targeting in a Small Open Economy”, Reserve Bank of Australia Research Discussion Paper No 9807. Available at http://www.rba.gov.au. Debelle, Guy (1997), “Inflation Targeting in Practice”, IMF Working Paper WP/97/35, March.