Deficits and debt in an open economy

A monetarist policy rule is feasible in a closed economy if the real growth rate exceeds the after-tax real interest rate. Is this condition sufficient to establish the feasibility of a monetarist policy in the corresponding small open economy model? Does the existence of foreign-owned debt accentuate the social cost of government expenditure, and, if so, by how much? This note addresses these questions by extending Darby's (1984) analysis of wealth accumulation identities.