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A nonlinear dynamic macroeconomic model of a small open economy is constructed. The model is based on the IS-LM structure and generalizes the Schinasi’s model of a closed economy. Sufficient conditions for the existence of the equilibrium of the model are found and the question of its stability is analyzed.

In this paper, a six‐dimensional model of flexible prices with the monetary and fiscal policy mix, describing the development of the firms’ private debt, the output, the expected rate of inflation, the rate of interest, government expenditure, and government bonds are analyzed. The stress put on the “twin debt accumulation” means that in our model both private debt accumulation and the public debt (government bond) accumulation are explicitly introduced. Questions concerning the existence of limit cycles around its normal equilibrium point are investigated. The bifurcation equation is found. The formulae for the calculation of its coefficients are gained. Numerical example illustrating the results attained is presented by means of numerical simulations.

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