“Helicopter Drop”: Perspectives on Modern Central Banking Challenges

Munteanu Bogdan
JEL codes: 
E31 - Price Level; Inflation; Deflation, E41 - Demand for Money, E51 - Money Supply; Credit; Money Multipliers, E52 - Monetary Policy, E62 - Fiscal Policy.
This paper aims to discuss the idea of Milton Friedman’s “helicopter drop” of money, analyzing the concept. It is an unconventional measure of monetary policy seen as a permanent uplift in the nominal monetary mass with a zero nominal interest rate, to finance budget deficit of fiscal authority from money issued by Central Bank. It could be a fiscal stimulus or purchases by the Central Bank of non-monetary sovereign debt, in both cases without affecting the current public spending from state budget. The paper takes into account the opportunity costs of such measure being deployed by ECB, looking at end-users (consumers) and psychology of decisions over money. In the end, the article reviews the opinions of leading economists and the conclusions reflect that it is not the time or necessity for ECB to resort to such measure now, as the previous measures of quantitative easing and negative interest rate are starting to pay-off producing the targeted result of 2% inflation rate.
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