Working Paper: NBER ID: w31046
Authors: Manuel Amador; Javier Bianchi
Abstract: We show that if the central bank operates without commitment and faces constraints on its balance sheet, helicopter drops can be a useful stabilization tool during a liquidity trap. With commitment, even with balance sheet constraints, helicopter drops are, at best, irrelevant.
Keywords: No keywords provided
JEL Codes: E31; E52; E58; E61; E63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| helicopter drops (L93) | economic stabilization (E63) |
| commitment of the central bank (E58) | irrelevance of helicopter drops (H84) |
| commitment of the central bank (E58) | limit stabilization of future output and inflation (E63) |
| lower net worth of the central bank (E58) | higher nominal balances (E49) |
| higher nominal balances (E49) | lower interest rates (E43) |
| lower interest rates (E43) | increased output (E23) |
| lower interest rates (E43) | increased inflation (E31) |