In a closed economy, interest rate is determined by equilibrium in the market for loanable funds
and the exchange rate is irrelevant. In the small open economy, interest rate is determined by the
global equilibrium interest rate and the exchange rate is determined by equilibrium in the market for
net exports.
In a closed economy, interest rate is determined by equilibrium in the market for loanable funds
and the exchange rate is irrelevant. In the small open economy, interest rate is determined by the
global equilibrium interest rate and the exchange rate is determined by equilibrium in the market for
net exports.
