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I think that inflation targeting needs to be seen as a transitional policy 
aimed ultimately at stabilizing international exchange rates and so 
creating the preconditions for a proper international monetary system.  To 
see this, think about how a world would work in which everyone targeted 
inflation and purchasing power parity held on average.  Then exchange rate 
movements would be determined by expected (targeted) inflation 
differentials only, and currency speculation could be stabilizing not 
destabilizing around those coordinated expectations. 
 
I think the reason we don't hear more about exchange rate stabilization, 
but only about inflation, had most to do with domestic consumption, and 
because the relevant political authorities are largely national.  In this 
sense I think that inflation targeting is just as much monetarist as 
Volcker's monetary targeting (which means just as little monetarist). 
 
Perry Mehrling 
 
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