Adopting inflation targeting framework was a successful new turn in monetary policy regimes of several developed countries. The objective is to maintain low inflation, although it results in abandoning other targets such as the nominal exchange rate. Existing literature shows that developing countries too could gain from adopting an inflation targeting framework. However, there are several pre-conditions required for adopting inflation targeting in developing countries. This paper shows that monetary transmission mechanism in Sri Lanka suffers from deficiencies, thus hindering the adoption of inflation targeting framework. (JEL E52, E58)

Sustainability of a country’s fiscal stance has become an important issue in recent policy discussions. Thus, in this paper, an attempt was made to analyse the fiscal sustainability in Sri Lanka using the Intertemporal Budget Constraint approach. The results reveal that fiscal stance is unsustainable. Conclusions arising from this study point to a further strengthening of the fiscal position. Although the recent behavior of fiscal variables is relatively favorable, this study emphasizes the insufficiency of those achievements and the necessity of a more committed effort in order to obtain a better position in fiscal management. Further strengthening of the fiscal position through enhancing revenues or reduction of expenditures are the major options (JEL H63).

This paper shows that there exist significant disparities among expenditure patterns of different households in different geographical areas in Sri Lanka. Although there are several indicators of inflation for the country as a whole no indicators are available for regions. This study computes consumer price indices for few selected districts and attempts to compare disparities in inflation in those districts. (JEL, E31)