Thank you for your further elaboration which will again contribute to clarify some points. Now that the paper has been finally rejected I feel free to comment on your notes. Let us assume no depreciation (δ = 0), as depreciation on government bonds seems not to make too much sense. Let us assume further that the rate of interest is time invariant (rt = r for all t); else all subsequent equations in your note dealing with present values would be problematic. (I pointed out these lapses in my reply to your first report.) The households ’ budget constraint is given in equation (3a) a
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