Working Paper: CEPR ID: DP15715
Authors: Charles A. Goodhart; Donato Masciandaro; Stefano Ugolini
Abstract: This paper analyses the monetary policy that the Most Serene Republic of Venice implemented in the years of calamities using a modern equivalent of helicopter money, precisely an extraordinary money issuing, coupled with capital losses for the issuer. We consider the 1629 famine and the 1630-1631 plague as a negative macroeconomic shock that the incumbent government addressed using fiscal monetization. Consolidating the balance sheets of the Mint and of the Giro Bank, and having heterogenous citizens – inequality matters - we show that the Republic implemented what was, in effect, helicopter money driven by political economy reasons, in order to avoid popular riots.
Keywords: monetary policy; central banking; helicopter money; pandemic; venice
JEL Codes: N1; N2; E5; E6; D7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Extraordinary money issuance policy (E49) | helicopter money (E49) |
| helicopter money (E49) | fiscal monetization (E62) |
| fiscal monetization (E62) | stabilize the economy (E63) |
| stabilize the economy (E63) | prevent social unrest (P37) |
| money supply expansion (E51) | monetary instability (E49) |
| monetary instability (E49) | government bailout of the central bank (E58) |
| redistribution effects (H23) | alleviate financial burdens on poorer citizens (H69) |
| long-term consequences (I12) | favored wealthier citizens (D72) |