Abstract
The investigation will be conducted within a small open economy characterized by perfect capital mobility. For the small open economy, the foreign interest rate is given exogenously r* = const. Perfect capital mobility means that the domestic interest rate coincides with the foreign interest rate r = r*. Therefore the domestic interest rate will be constant, too. Without losing generality, let the exchange rate be unity.KeywordsCentral BankCurrent AccountPublic DebtBudget DeficitForeign AssetThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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