Working Paper: CEPR ID: DP14555
Authors: Pierpaolo Benigno; Salvatore Nistico
Abstract: An economy plagued by a slump and in a liquidity trap has some options to exitthe crisis. We discuss helicopter money and other equivalent policies that can reflate the economy and boost consumption. Traditional helicopter money, via the joint cooperation between the treasury and the central bank, depends critically on the central bank fully guaranteeing treasury's debt. We show that the central bank can do helicopter money on its own, without any treasury's involvement.
Keywords: Helicopter Money; ZLB; Pandemic Crisis
JEL Codes: E50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| helicopter money (E49) | consumption (E21) |
| helicopter money (E49) | aggregate demand (E00) |
| central bank's guarantee of treasury's debt (H63) | effectiveness of helicopter money (H89) |
| central bank implements helicopter money (E52) | private sector wealth (P12) |
| private sector wealth (P12) | consumption (E21) |
| central bank reduces net worth (E58) | wealth effects (E21) |
| wealth effects (E21) | consumption (E21) |