Contents -- I. Introduction -- II. Overview of Tunisia's Program of Economic Reforms -- A. Financial Sector Reforms -- B. External Sector and Policies -- C. Monetary Policy Framework -- III. Using Interest Rates as the Operating Target: Money Market Deepening -- A. Interbank Money Market and Liquidity Management in Tunisia -- B. Monetary Management: Assessment and Way Forward -- C. Money Market Deepening -- IV. Empirical Evidence for the Interest Rate Channel in Tunisia -- A. Theoretical Background to Assessing the Transmission Mechanisms -- B. Review of the Literature on Tunisia -- C. Assessment of the Transmission Mechanisms in Tunisia -- D. What do Reaction Functions Tell Us in Tunisia? -- V. The Way Forward for Tunisia's Monetary Policy Framework -- A. Tunisia's Compliance with the Building Blocks of Inflation Targeting -- B. Strengthening Compliance with the Building Blocks of Inflation Targeting -- VI. Concluding Remarks -- References -- Tables -- 1. Estimates of an Interest Rate Reaction Function -- 2. Compliance with the Building Blocks of an IT Framework -- Figures -- 1. Key Monetary Indicators -- 2. Response Functions for Model 1' -- 3. Response Functions for Model 1′′\f C -- 4. Response Functions for Model 2 -- Boxes -- 1. Objectives of the 11th Economic Plan -- 2. Summary of Exchange Arrangements -- 3. Monetary Policy Instruments -- 4. Reaction Function of Central Banks: Between Theory and Practice -- Appendices -- I. Tunisia: Monetary Targeting Framework -- II. Inflation Targeting in Emerging Economies -- Appendix Tables -- 3. Tunisia: Reforms in the Monetary, Financial and External -- 4. Detailed Compliance with the Building Blocks -- 5. Unit Root Tests.