Abstract
Purpose - The purpose of this paper is to deal with the dynamics of a Neo-Keynesian model applied to a small open economy, in order to show the impact of commercial openness on the choice of the optimal inflation target.
Design/methodology/approach - The author uses a neo-Keynesian model with calibration for Chile.
Findings - The results show that there is a relation between the degree of openness and the type of inflation targeting policy.
Originality/value - The originality of the paper is to use a neo-Keynesian model to deal with a small open economy, which uses inflation targeting as a monetary rule.