The article explores whether it's better for the central bank to target CPI inflation or domestic inflation in an open economy. They found that the choice depends on the temporal properties of disturbances. When considering society's welfare, targeting domestic inflation aligns with the central bank's choice. However, if qualitative aspects matter, the role of temporal properties becomes less important. The study used a model for a small open economy and found that the degree of openness affects the IS relation parameters. Additionally, under domestic inflation targeting, the direct exchange rate channel in the Phillips Curve can hinder the effectiveness of monetary policy during demand-side disturbances.