Existence and uniqueness of equilibrium in a distorted dynamic small open economy

•Unique recursive equilibrium exists for a distorted dynamic small open economy.•New existence proof for recursive equilibrium.•A small open economy mapped into known closed economy models with recursive equilibrium.

We provide a set of sufficient conditions for existence and uniqueness of recursive equilibrium for a class of small open economies with distortion. The second welfare theorem is not available in this framework and usual approach for studying optimal neoclassical growth models is also not applicable.