INTRODUCTION Since the 1990s, a large number of industrial countries and a growing number of emerging market and transition economies have adopted inflation targeting as a strategy of monetary policy. They face many challenges during implementation. However, there is no established model, so countries must learn along the way from each other and, above all, from their own experience. This paper provides an overview of inflation targeting as a monetary policy strategy, the prerequisites necessary for its successful implementation, its advantages and disadvantages, and the issues and challenges that emerging markets and transition economies face when defining and the implementation of this monetary policy strategy. Inflation Targeting as a Monetary Policy Strategy The macroeconomic policy of any country has several objectives such as employment, economic stability, economic development and output growth. These objectives are achieved through an adequate fiscal and monetary policy conducted by the "most important players in the financial markets", the central banks. Sound macroeconomic policy means a healthy economy which can be achieved through one of three monetary strategies: monetary targeting, inflation targeting and implicit nominal pegging. Central banks are held highly responsible for conducting monetary policy and achieving objectives. In other words, such regimes appear to be highly transparent. Furthermore, what these three strategies have in common is that all three focus on price stability, which represents, for most of the world's central banks, the main objective of monetary policy. Not long ago policy makers reintroduced the concept of targeting. They first introduced monetary targeting during the 1970s and 1980s, and then in 1989 infla...... middle of paper ......//www2.gsb.columbia.edu/faculty/fmishkin/ PDFpapers/w5893. pdf• Mishkin, Frederic S. and Schmidt-Hebbel, K., 2006, “Does inflation targeting make a difference?” Central Bank of Chile Working Papers No. 404 available at http://www.bcentral.cl/estudios/documentos-trabajo/pdf/dtbc404.pdf• ​​Johnson, D., 2002, “The Effect of Inflation Targeting on the Behavior of Expected Inflation: Evidence from an 11 Country Panel”, Journal of Monetary Economics 49, pp.1521-1538;• Gerlach, S., 1999, “Who Explicitly Targets Inflation?” European Economic Review 43, pp.1257-1277;• Lin, S. and Ye, H., 2009, “Does inflation targeting make a difference in developing countries?” Journal of Development Economies 89, pp.118-123;• Cukierman, A., 1996, The Economics of Central Banking, in: H. Wolf (ed.) Contemporary Economic Issues: Macroeconomic and Finance, Basingstoke, UK: Macmillan.