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Helicopter Money:A Conceptual Insight

Affiliations

  • Symbiosis Centre for Management Studies, Pune, Maharashtra, India

Abstract


The following study tries to give an insight into helicopter money and what its possible effect could be. After the onslaught of the financial crisis in the year 2008, Central banks and the financial institutions across the world have tried different methods to revive the economy and keep consumer spending afloat. Quantitative easing was the first step where the bad loans were bought back by the central banks and replaced with fresh money. Financial arrangement usage was at its points of confinement after three Quantitative Easing (QEs) jolt in the US and an operational quick when there was a liquidity trap (loan fees were about zero) and the economy driven in a moderate development mode. But unfortunately the money found its path to the securities market and did not go into the hands of the consumers thereby not delivering the expected results. The next step in this process was money finding its path directly into the hands of the consumers so that they could spend it and thereby give a consumption thrust to the economy-the term called helicopter money which is currently being proposed as a contrasting option to QE and which could be a standout amongst the most flighty of all the fiscal strategies so far embraced by nations. In favour of financial arrangement, it is impractical to expand the total request as a result of the legislative issues included and the uneasiness over the incrementally high government obligation. Printing cash to fund the financial exchanges however may look engaging, overwhelmingly in the wake of Brexit may not demonstrate productive. No country has ever adopted it before and hence it is difficult to simulate the consequences that could emerge because of money being dropped directly from helicopters. The theory of helicopter money being proposed by economists has never been practised before and Japan may be the first country in the world to experiment it. For others it is still an investigation to be considered however which may change later on. Economists like Ben Bernanke bolstered it as a technique for final resort. What would actually emerge is a matter yet to be seen.

Keywords

Central Bank, Fiscal Policy, Helicopter Money, Monetary Policy, Quantitative Easing, Stimulus.

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References


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