Mao Takongmo, C. O. (2017). Government-Spending Multipliers and the Zero Lower Bound in an Open Economy. Review of International Economics, 25, 1046-1077.
https://doi.org/10.1111/roie.12295

has been cited by the following article:

• TITLE: Revisiting the AA-DD Model in Zero Lower Bound

  AUTHORS: Charles O. Mao Takongmo

  KEYWORDS: The AA-DD Model, Zero Lower Bound, the Exchange Rate, Government Spending

  JOURNAL NAME: Theoretical Economics Letters, Vol.13 No.2, April 24, 2023

  ABSTRACT: This paper proposes a simple model of a mechanism through which exchange rate can affect the link between output and government spending in zero lower bound (ZLB) periods. In our proposed model, the expected near-future interest rate is added as an endogenous variable. Unlike existing AA-DD models in ZLB, the nominal exchange rate is no longer constant. Our model predicts that the output effect of an increase in government spending in a ZLB period is deflected by an appreciation of the current exchange rate. The AA-DD model is taught in almost all economic departments. The model is also generally used by many central banks and governments. The existing AA-DD model can be misleading. Our new AA-DD model may help to update the existing model in ZLB periods. Our AA-DD model is also consistent with recent dynamic stochastic general equilibrium models in open economies in ZLB periods.