Introduction

Monetary policy, including monetary policy frameworks, central bank independence and exchange rate regimes, is an area in which both academics and policymakers have made enormous strides in the last two decades. The main thrust of work in both academic institutions and central banks has been towards a better understanding of what monetary policy can and cannot do and how it can best be designed. Most of this work has focused on the industrial countries and on a small number of developing countries, mostly in Latin America, while the economies of the MENA region remain under-researched in this respect. As regards monetary policy frameworks, economists at the Central Bank of Turkey have produced a number of research papers (eg Emir et al., 2000; Ozatay, 2005) and other economists have made important contributions (eg Celasun and Rodrik, 1989; Canova and Favero, 2005). Pesaran (2000) has studied money demand in Iran and found a structural break between the pre-and post-revolutionary periods which has implications for monetary policy. Bonato (2008) has studied the monetary causes of infl ation in Iran during the period 1988-2006. Some work has been done on monetary policy in Lebanon (e.g. Dibeh, 2002; Makdisi, 2004) and in Egypt (e.g. Abdel-Khalek, 2001; Ikram, 2006). However, the quantity of research on these countries is limited and that on other Arab countries is even more so. For example, the Bank of England survey (Mahadeva and Sterne, 2000), which gives basic information on monetary policy targets and central bank independence for some 90 countries, includes only Bahrain, Egypt, Jordan, Kuwait, Lebanon and Turkey from the MENA region, which means it excludes the Maghreb countries, Libya, Syria, Iraq, Iran, Saudi Arabia, Qatar, Oman and the UAE.