Inflation Targeting, Employment Creation and Economic Development: Assessing the Impacts and Policy Alternatives ∗ Gerald Epstein Professor of Economics Co-Director, Political Economy Research Institute University of Massachusetts, Amherst and Erinc Yeldan Professor of Economics Bilkent University, Ankara Executive Committee Member International Development Economics Associates (IDEAs), New Delhi This draft: May 2007 ∗ We are indebted to Hasan Comert and Lynda Pickbourn for their diligent research assistance, and to Roberto Frenkel, Jose Antonio Ocampo and Jomo, K.S. for their valuable comments and suggestions on previous versions of the paper. We are also grateful to colleagues at Bilkent and University of Massachusetts, Amherst, in particular, James Heintz, Leonce Ndikumana, and Arjun Jayadev and Robert Pollin for their contributions. Research for this paper was completed when Yeldan was a visiting Fulbright scholar at the University of Massachusetts, Amherst for which he acknowledges the generous support of the J. William Fulbright Foreign Scholarship Board and the hospitality of the Political Economy Research Institute at UMass, Amherst. We are also grateful to the funders of the PERI/Bilkent Alternatives to Inflation Targeting project, including UN-DESA, Ford Foundation, Rockefeller Brothers Fund and PERI for their support. Needless to mention, the views expressed in the paper are solely those of the authors’ and do not implicate in any way the institutions mentioned above.