both central bank ability and preference in developing countries are fundamental to explain the inflation bias and the movement of monetary policy
instruments.
In a recent study, Addison (2008) showed that inflation targeting policy in Ghana has succeeded in reducing the inflation rate from 60% in 2000
to near 15% in 2007. He mentioned that inflation targeting policy started
by introducing the new Bank of Ghana Act. This new act helped to provide the Bank of Ghana with some degree of independence by determining
unambiguous financial relations with the government. Bakradze and Bill-
meier (2007) explored whether Georgia is ready to adopt inflation targeting or not. The answer of their study is no because Georgia is not ready
yet for such a policy. Georgia suffers institutional and operational weakness. The National Bank of Georgia does not have a degree of independence, and monetary policy transmission mechanism is not clear yet. Yao
and Porter (2005) investigated the inflation targeting lite" framework in
Mauritius in which the Bank of Mauritius has adopted an annual inflation
target since 1996. Evidence from Mauritius shows that inflation targeting
lite causes a fall in the inflation rate. This result is due to the credibility
that the Bank of Mauritius gained from such a policy, which led to a successful reduction in inflation expectations.