Steve Ambler

Recent Unpublished Papers


A Tale of Two Velocities (July 2017)

Abstract

Quantitative easing in the US has meant a massive increase in the size of the Fed's balance sheet and the monetary base without a commensurate increase in inflation. Instead, velocity has decreased dramatically. The only comparable episode in recent economic history was Japan's experiment with quantitative easing in the early 2000s, where inflation remained low or negative and which ended in 2006 when the Bank of Japan reduced the size of its balance sheet to a level compatible with the growth path it was on before quantitative easing. We show that this is precisely what we would expect in a standard New Keynesian model in response to an increase in the money supply that is expected to be temporary.

Working paper version here

Latest version here


The Effectiveness of Unconventional Monetary Policy in the Euro Area: An Event and Econometric Study (with Fabio Rumler, March 2017)

Abstract

We use daily data on government bond yields and market-based inflation expectations (from inflation-linked swaps) to measure the effectiveness of unconventional monetary policy (UMP) in the euro area. We focus on the effects of policy announcements on ex-ante real interest rates, since the main transmission mechanism of monetary policy is through real interest rates and their effect on aggregate demand. We find evidence of significant impacts of UMP announcements of the ECB on real interest rates at maturities of five and ten years that operate by raising inflation expectations. When distinguishing among UMP announcements that exceeded or disappointed market expectations, we find that the former significantly reduced nominal and real interest rates and increased inflation expectations while the latter had the opposite effect.

Working paper version here

Latest version here


Does the Crowding-In Effect of Public Spending on Private Consumption Undermine Neoclassical Models? (with Hafedh Bouakez and Emanuela Cardia, March 2017)

Empirical evidence from vector autoregressions (VARs) showing that public spending shocks crowd in private consumption has been seen as evidence against standard neoclassical models of the business cycle. We show that a standard real business cycle model in which all agents including the government optimize is compatible with the results from the empirical literature. A VAR estimated using artificial data simulated from the model indicates that, under standard assumptions to identify public spending shocks, an increase in public spending is associated with an increase in private consumption and the real wage. The implied impulse responses are qualitatively and quantitatively similar to those in the empirical literature.

Available here


Inflation Targeting, Price-Level Targeting, the Zero Lower Bound, and Indeterminacy (with Jean-Paul Lam, November 2016)

with Jean-Paul Lam

Abstract

We compare inflation targeting and price-level targeting in the canonical New Keynesian model, with particular attention to multiple steady-states, indeterminacy, and global stability. Under price-level targeting we show the following: 1) the well-known problem of multiple steady-state equilibria under inflation targeting is absent; 2) the model's dynamics close to the steady state are determinate for a much wider range of parameter values; 3) the model is globally saddlepoint stable. These results provide additional arguments in favour of price-level targeting as a monetary policy framework.

Working paper version here

Latest version here


Inflation Targeting, Price-Level Targeting and the Zero Lower Bound (with Robert Amano, March 2014)

Abstract

We evaluate inflation targeting and price-level targeting in a simulation model that explicitly takes into account the central bank's zero lower bound constraint on its policy rate. We find that the economy is much less likely to hit the zero bound under price-level targeting for a given rate of inflation. Trend inflation is optimally positive under both regimes because of the zero lower bound, but is lower under price-level targeting, which delivers an enhanced level of economic welfare. Monetary policy is modeled using simple rules. We model the lower bound constraint with a smooth function that can approximate a kink.

Available here


Real Rigidities and Endogenous Nominal Wage Rigidity (July 2010)

Abstract

The paper uses a simple model of monopolistic competition in the labor market to show that nominal wage rigidity can be endogenized with modest costs of adjusting wages and without the types of real rigidities introduced in recent New Keynesian models. In contrast, models of nominal price rigidity require strong real rigidities or implausibly high adjustment costs to endogenize nominal price rigidity. The minimum size of the cost of adjusting wages remains modest even if labor supply is inelastic, different labor types are highly substitutable, or there are decreasing returns to labor in production.

Available here


Terms of Trade Shocks, Monetary Instability and Exchange Rate Regime Choice (July 2010)

This paper reexamines the case for fixed exchange rates using a microfounded model of a small open economy with nominal wage rigidities and subject to both terms of trade shocks and money demand shocks. If monetary instability is sufficiently important compared to real shocks, a fixed rate regime improves welfare over a flexible rate regime with an exogenous money supply. The relative importance of the two types of shocks can be calibrated to reproduce the observed increase in real exchange rate variability in industrialized countries under flexible rates.

Available here


Some Useful Linux Commands (February 2002)

The title says it all. I include this here since it's still getting steady downloads.

Available here


Last changed – Dernière mise à jour: 06/07/2017

Fremd bin ich eingezogen, Fremd zieh' ich wieder aus. (Wilhelm Müller/Franz Schubert, Die Winterreise)