Diagnostic expectations are the most recent deviation from the mainstream rationality hypothesis in macroeconomics and finance literature. In this paper, I explore the implications of incorporating representativeness, in the form of diag- nostic expectations, into a Small Open Economy Model à la Justiniano and Preston (2010). The main results show that a small open economy populated with diagnos- tic agents is characterised to be broadly more volatile than its rational counterpart. Moreover, the magnitude of such results depends not only on the degree of beliefs distortion, but also on the parameterisation of the model. Finally, persistence mechanisms do help in propagating and intensifying the amplification effects of diagnostic expectations when different shocks hit the economy.
