Degree of openness and inflation targeting policy: model of a small open economy
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.
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Volume (Year): 4 (2012)
Issue (Month): 3 (August)
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