This paper derives a reduced-form expression for an interestrate in an open economy by incorporating after tax covered interest parity conditions into a simple neo-classical macro model. The result clearly demonstrates that the relationship between an interest rate and variables used to explain...

In this paper we develop a general model of an imperfectly competitive small open economy. There is a traded and non-traded sector, whose outputs are combined in order to produce a single final good that can be either consumed or invested. We make general assumptions about preferences and...