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Most smaller countries with their own currency can not do (ii), because they can only get dollar or euro denominated debt from international markets/institutions.


What's "smaller" in this case?

I thought that most countries didn't need to borrow money internationally, they just sell bonds primarily to their own citizens.


Depends on whether they are running a current account deficit too, in which case there will be net borrowing from abroad. Many countries borrow quite substantially abroad.


They are lots of countries with debt dominated in foreign currency. Especially developing ones.




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