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Sascha Buetzer
This paper argues that in reserve currency issuing economies at the effective lower bound, outright transfers from the central bank to households are both more equitable and more effective in achieving monetary policy objectives than asset purchases or negative interest rates. It shows that concerns pertaining to central banks’ policy solvency and equity position can be addressed through a careful assessment of a central bank's loss absorbing capacity and, if need be, tiered reserve remuneration policies. It also spells out key differences to a debt or money financed fiscal stimulus, which are particularly pronounced in a currency union without a central fiscal capacity. The paper concludes by discussing broader institutional, political, and legal considerations.
Sascha Buetzer

Solvency, Central Bank Equity, Helicopter Money, Inequality Author’s E-Mail Address: sbuetzer@imf.org * The author would like to thank Shekhar Aiyar, Bas Bakker, Ulrich Bindseil, Marijn Bolhuis, Damien Capelle, Marco Casiraghi, Piet Philip Christiansen, Marco Gross, Maurizio Habib, Simon Gray, Vikram Haksar, Gerhard Illing, Stan Jourdan, Sylvio Kappes, Jens van’t Klooster, Tobias Krahnke, Marc Lavoie, Jesper Lindé, Eric Lonergan, William Oman, Brett Rayner, Neil Shenai, Arthur Sode, Manmohan Singh, Livio Stracca, Steffen Strodthoff, Robert

Mr. Antonio Spilimbergo

the economic system itself, as well as the consequence of events that changed the political landscape. Eric Lonergan and Mark Blyth Angrynomics Columbia University Press, New York, N Y, 2020, 192 pp., $30.00 The final section is dedicated to proposals, including helicopter money, dual interest rates, fiscal councils, raising money from licensing, sovereign wealth funds, and carbon taxes. Unfortunately, most of these measures have been proposed before and include well-known economic drawbacks. Yet the authors’ most intriguing idea is the

Adair Turner

it would be important to be clear that “much or all of the increase in the money stock is viewed as permanent.” • He suggested that businesses and companies would willingly spend the money received since “no current or future debt service burden has been created” (i.e., no Ricardian equivalence offset would logically arise). • He argued that the debt-to-GDP ratio would fall, since there would be no increase in nominal debt but a rise in nominal GDP. This is helicopter money or, as I labeled it in a recent lecture, “overt money finance of an increased fiscal

Sascha Buetzer

disruptive liftoff from the ELB. OT could be implemented within the existing payments infrastructure although the emergence of central bank issued digital currencies (CBDC) could facilitate its use and allow for a more structural integration in central banks’ monetary policy toolkits (cf. Barrdear and Kumhof (2016) and Bindseil (2020)). OT constitutes a special case of “helicopter money” which has been proposed as an addition to the monetary policy toolkit by many scholars such as Gali (2020) , Boivin et al. (2019) , Bernanke (2016) , Sims (2016) , Turner (2015a

Mr. Peter Stella and Mr. Manmohan Singh

rapid money growth, as it so seems, why not finance fiscal deficits with money rather than debt? 13 This notion underpins the current popularity of “helicopter money”. As we believe the development of modern financial markets completely invalidates this view, it is important to articulate the key difference between endogenous money growth and exogenous monetary finance and spell out why and when monetary finance is inflationary. In this paper, we discuss the modern history of monetarism and its alternatives, as well as the changing empirical relationship of

Mr. Itai Agur, Mr. Damien Capelle, Mr. Giovanni Dell'Ariccia, and Mr. Damiano Sandri

implemented make it easier or harder for the central bank to reabsorb the increase in monetary base, announced plans can be altered. Holdings of sovereign bonds acquired through QE could be rolled over indefinitely leading to a permanent increase in the monetary base. And even helicopter money could be sterilized (at a cost) in the future through the emission of central bank notes. It follows that MF raises two opposite concerns. On the one hand, MF can fail to deliver strong stimulus because the central bank may be unable to commit to a permanent increase in the monetary

International Monetary Fund. Asia and Pacific Dept

purchases and then converts to a non-interest-bearing non-redeemable asset; or (c) through the issuance of interest-bearing debt which the central bank perpetually rolls over while remitting to the government as profit the interest income it receives from the government. Non-technically, these measures amount to financing the budget deficit by issuing central bank money. To be precise, Turner’s proposal essentially contains three elements (i) more explicit coordination between monetary and fiscal policies (helicopter money); (ii) the conversion of Bank of Japan holdings

Mr. Peter Stella and Mr. Manmohan Singh
In this paper, we discuss the modern history of monetarism and its alternatives, as well as the changing empirical relationship of various measures of money and inflation. After demonstrating that previous naïve correlations between money and inflation as established in the 20th century literature have largely disappeared, we explain why this cannot be taken as support for an increased reliance on permanent monetary finance. Rather, we argue that rapid technological innovation in payments systems—both public and private—including in global pledged collateral markets, portends a declining demand for central bank liabilities.