Alex Cukierman, 27 July 2020

The use of helicopter money as a monetary policy response to Covid-19 has drawn significant attention over recent months. This column offers a comparison of helicopter money and quantitative easing, as used in the wake of the global financial crisis. By evaluating the similarities and differences, as well as the contrasting contexts of each crisis, key advantages and disadvantages are identified. It concludes that the two policy mechanisms may not be as different as first thought, and helicopter money could well be crucial in combating the economic effects of COVID-19. 

Biagio Bossone, Harish Natarajan, 15 July 2020

Governments and economists are now focused on the macroeconomic policies that can support economies during the Covid-19 pandemic. Yet, for policies to be effective and economies to function, payment systems and services must operate efficiently, reliably, and securely. The third column of this series analyses the role that a central bank digital currency can play in this context, and outlines the key steps required for its successful implementation. In addition, the column proposes improvements to the existing payments infrastructure to ensure continued operability, especially in times of emergency.

Donato Masciandaro, 18 April 2020

In every crisis, economists will tell us that it is time for helicopter money, and Covid-19 is no different. But the helicopters never seem to take off. Donato Maschiandaro tells Tim Phillips why not.
Read about helicopter money in Issue 7 of Covid Economics.

Sony Kapoor, Willem Buiter, 06 April 2020

COVID-19’s economic impact on crumbling GDPs, collapsing tax revenues and ballooning fiscal deficits will be much larger than what has been reported thus far. Any hesitation in throwing everything but the kitchen sink at the health, employment, state aid and financial rescue interventions that are needed will literally kill citizens and destroy the economy. To combat COVID-19, central banks, including the ECB, must cross the Rubicon of monetary financing and immediately transfer the 20%-30% of GDP this will cost into fiscal coffers.

Eran Yashiv, 26 March 2020

The use of helicopter money has been proposed to help combat the economic repercussions of the COVID-19 pandemic. The policy has been seen as blasphemy until now, and this column presents a political economy plan to break the taboo. The creation of emergency authority for central banks and the formation of a COVID policy committee could help establish the policy as a one-off, emergency money-financed plan, giving the central bank the authority to act quickly and then revert to the ‘no money-printing’ norm as the crisis subsides.

Jordi Galí, 17 March 2020

The measures many countries are taking to contain the spread of coronavirus, while necessary, are bound to have a direct impact on the economy. This column argues that rather than raising taxes and/or increasing government debt to finance the necessary fiscal programmes, the time has come for ‘helicopter money’ – direct, unrepayable funding by the central bank of the additional fiscal transfers deemed necessary.

Ian Bright, Senne Janssen, 13 January 2017

With growth and inflation in Europe remaining low, the idea of helicopter money is slowly gaining traction with politicians and economists alike. This column presents the results of a survey that asked people how, if they were to receive an extra €200 per month to do with as they chose, they would use the money. There was broad support for the policy among respondents, but only about one in four said they would spend most of the money. The findings suggest that a larger impact might be achieved if instead the money were given to the government to finance projects.

Biagio Bossone, 05 September 2016

Some economists see helicopter money as a free lunch, because it can prompt growth without requiring higher debt financing. This column argues that if there are costs associated with the permanent injection of cash into the economy, they would diminish its effectiveness.

Stephen Cecchetti, Kim Schoenholtz, 19 August 2016

Helicopter money is not just another version of unconventional monetary policy. Using simple central bank and government balance sheets, this column explains how helicopter money today is different from what Milton Friedman imagined back in 1969 – it is expansionary fiscal policy financed by central bank money.

John Muellbauer, 10 June 2016

The Eurozone faces a lost decade or worse under current fiscal policy and restrictions on monetary policy. The ECB now faces a fundamental contradiction in its mandate between the Lisbon Treaty’s Article 127 (price stability, plus the ECB target of under but close to 2% inflation) and Article 123 (no overt monetary finance of governments). This article discusses three options – two ways in which the fiscal rules could be improved; and the temporary abeyance of Article 123, making it ‘state-dependent’. It also explains why recent arguments against the effectiveness of ‘helicopter money’ are mistaken.

Claudio Borio, Piti Disyatat, Anna Zabai, 24 May 2016

Seven years on from the great financial crisis and despite central banks being seen by many as ‘the only game in town’, there has been a renewed push for monetary policy to experiment even further. One of the latest proposals is the revival of Milton Friedman’s ‘helicopter money’. But have all the implications of what many see as central banks’ ‘nuclear option’ been fully appreciated? This column argues that this is not the case. Realising the benefits that its proponents claim exist would require giving up on interest rate policy forever.

Richard Baldwin, 13 April 2016

Helicopter money is frequently in the headlines but frequently misunderstood. This column reviews the VoxEU columns that have – since 2010 – provided research-based policy analysis of this ‘beyond unconventional’ policy. 

Biagio Bossone, Marco Cattaneo, 04 January 2016

‘Helicopter tax credits’ have been proposed as a means of injecting new purchasing power into the economies of Eurozone Crisis countries. This column outlines one such system for Italy. The Tax Credit Certificate system is projected to accelerate Italy’s recovery over the next four years, and will likely be sustainable. It also provides a tool to avoid the breakup of the Eurosystem and its potentially disruptive consequences.

Richard Baldwin, 25 December 2015

Team Vox wishes to thanks all its readers and contributors for making 2015 a great year for the site. Vox will post no new columns between 25 December 2015 and 2 January 2016. There is, however, plenty to catch up on. This column presents a list of topical columns written by leading economists in 2015. It also presents a few statistics on Vox’s popularity.

Willem Buiter, Ebrahim Rahbari, Joe Seydl, 05 June 2015

Stagnation is gripping several of the world’s largest economies and many view this as secular, not transient. This column argues that many economies need both demand-side stimulus and supply-side reform to close the output gap and restore potential-output growth. A combined monetary-fiscal stimulus – i.e. helicopter money – is needed to close the output gap, and this should be accompanied with extensive debt restructuring, policies to halt rising inequality, and additional public infrastructure investment.

Francesco Giavazzi, Guido Tabellini, 17 January 2015

The ECB may soon launch QE. Two of Europe’s leading macroeconomists argue that QE is the ECB’s last anti-deflation tool – it must not be sacrificed to political expediency. The risk-sharing debate is secondary to the programme’s size and duration – one example would be €60 billion per month for one year, or until inflation expectations rose to near 2%. The ECB should also explain that no matter how well the monetary part of the programme is designed, an accompanying fiscal expansion is critical to QE’s effectiveness.

John Muellbauer, 23 December 2014

Eurozone deflation is likely to become reality when the annual inflation figure for 2014 is announced in January. This column argues that the ECB should develop a strategy that works in the Eurozone’s unique financial setting, instead of following the Fed’s lead. The author proposes that the ECB should pursue ‘quantitative easing for the people’, such as sending each adult citizen a €500 cheque.

Biagio Bossone, Thomas Fazi, Richard Wood, 01 October 2014

High debt and deflation have afflicted Japan, the Eurozone, and the US. However, the monetary and fiscal policies implemented so far have been disappointing. This column discusses the importance of helicopter money in the form of overt monetary financing in addressing these problems. Overt money financing is the policy with the highest impact in raising demand and output without increasing public debt and interest rates. 

Roberto Perotti, 13 September 2014

There is a growing consensus that austerity is contributing to the Eurozone’s macroeconomic malaise, but also that spending cuts are needed in the long run to achieve fiscal sustainability. Some commentators have advocated a temporary tax cut financed by unsterilised ECB purchases of long-term public debt, accompanied by a commitment to future spending cuts. This column argues that such commitments are simply not credible – especially given the moral hazard problem created by central bank monetisation of debts.

Biagio Bossone, 05 October 2013

So-called ‘helicopter money’ policies – those in which government spending or transfers to households are paid for by printing money – involve both monetary and fiscal policy. This means they require extraordinary cooperation between the government and the central bank, which potentially undermines central-bank independence. However, emergency policies of this type may be justified during extreme systemic crises. Injections of helicopter money can increase net wealth and thus stimulate spending, and this mechanism is particularly important when conventional monetary policy is stuck at the zero lower bound.

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