Discuss the key criteria for success and the advantages of a central bank adopting the framework of inflation targeting.

What will be an ideal response?

Inflation targeting is a framework where a central bank announces a specific target for inflation. The central bank then focuses its attention on using the operational instrument(s) to reach the ultimate objective of the inflation target. The advantages include accountability for the central bank since everyone knows the target and can gauge the performance of the central bankers. The key criteria for success would include selecting the right measure of inflation. It should be one that people outside of the central bank can calculate. Credibility is also key; the central bank has to make it clear that it takes the target seriously. As the text mentioned, most central banks that have used inflation targeting operate under a "hierarchical mandate" where inflation comes first and everything else comes second.