I see the equation in Latex form. My doubt is related to the country risk premium that should add to the World interest rate (INT rate = World rate + country risk premium)

I put it int \LaTeX. The question is your definition of b_t. In it’s current form, if positive b_t is indebtedness of the domestic economy, then the original equation should have +\phi e^{b^*_t-\bar b}
to have debt increase the risk premium. Obviously, the problem is not the linearization.