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Home > Research > Research Publications Research Update New Titles in the Staff Reports Series Number 2, 2008 Return to index page   Staff Reports home page   International   No. 329, June 2008 Inflation Dynamics in a Small Open-Economy Model under Inflation Targeting: Some Evidence from Chile Marco Del Negro and Frank Schorfheide Marco Del Negro and Frank Schorfheide This paper estimates a small open-economy dynamic stochastic general equilibrium (DSGE) model, specified along the lines of Galí and Monacelli (2005) and Lubik and Schorfheide (2007), using Chilean data for the full inflation-targeting period of 1999 to 2007. The authors study the specification of the policy rule followed by the Central Bank of Chile, the dynamic response of inflation to domestic and external shocks, and the change in these dynamics under different policy parameters. They use the DSGE-VAR methodology from their earlier work (2007) to assess the robustness of the conclusion to the presence of model ­misspecification.