A Paradigm Shift in Monetary Policy: Critical Re-evaluation of Inflation Targeting Mechanisms

Abstract

This article critically examines the established framework of inflation targeting within contemporary monetary policy, emphasizing its limitations in addressing macroeconomic volatility in the post-pandemic landscape. Through a mixed-methods approach, including quantitative analysis of economic indicators and qualitative assessments from leading economists, we provide a robust critique of the prevailing paradigms that have shaped monetary policy in recent decades. Our findings reveal significant discrepancies between theoretical expectations and real-world outcomes, prompting a need for a fundamental shift in how central banks approach inflation targeting. We propose alternative frameworks that prioritize economic stability and adaptive responses to evolving market conditions, ultimately suggesting a reconfiguration of policy tools to enhance resilience against future economic shocks.