Selection of optimal monetary rule: what type of inflation targeting?

The purpose of the paper is to survey and discuss inflation targeting in framework of monetary policy rules. This study design an optimal economy model for Iran which compare different cases of domestic and CPI inflation targeting، strict and flexible inflation targeting. In Relation to this، the optimal monetary policy rule was designed using three constraints Neo-Keynesian Phillips curve، aggregate demand function and CPI inflation function،that have been estimated by Generalized Method of Moments (GMM). In analysis، it seems that using inflation targeting in the case of strict targeting is the first preference among alternatives in making decision of policy makers for Iran. But this study suggests only one scenario for decision making in which use the CPI inflation target in sticky mode. Because the central bank will be impose the least possible losses.