Finanshus: Tid til at centralbanker stimulerer med Helicopter Money?

Secondly, the central bank can distribute money directly to all households by, for example, depositing money on the households’ tax accounts. This means that the central bank “gets round” the state and disburses transfers of funds itself, in order to stimulate the economy.

The debate regarding “helicopter money” has intensified recently; this is often highlighted as the last resort when standard monetary policy and fiscal policy have reached the end of the road. There are, however, considerable legal and practical problems with helicopter money.

Nevertheless, we cannot rule out some countries that have limited monetary policy alternatives resorting to helicopter money, or helicopter-like measures, if a deep recession arrives.

Some people claim that helicopter money is already here, as central banks are buying government bonds, and in practice funding large parts of the public debt at a very low interest rate. But it is doubtful whether we can call this helicopter money, as the bonds do not have a perpetual maturity, and the interest rate may go up. In the debate, it sometimes appears as if “standard” fiscal policy stimulus measures are also helicopter money. For example, Hong Kong has recently stated that it will distribute money to all permanent residents of the territory over the age of 18, and in conjunction with the financial crisis, several countries distributed money to households.

However, according to the definition of the theory, these measures have not constituted helicopter money, as the governments have funded the stimulus in the normal way by increasing public debt.