We usually heard about Helicopter Shot, but most of us not aware of Helicopter Money. Let’s know about it, and why it is useful during a recession.
The Concept was authored by prevalent American economist specialist Milton Friedman in 1969 in his paper “The Optimum Quantity of Money” for the government hoping to lift their economies out of a ghetto.
What is Helicopter Money?
Helicopter money was introduced as an alternate to Quantitative Easing (QE) when interest rates are near to zero and the economy remains fragile or enter into a recession. The term ‘helicopter money‘ is used to refer a wide range of different policies, including the ‘permanent’ monetization of budget deficits.It is expansionary fiscal policy financed by central bank money.
Initially utilized by Friedman to represent the impacts of monetary policy during inflation and the expenses of holding cash, instead of a real policy proposal, the idea has talked about by market analysts as a genuine alternative option to monetary policy instruments, for example, quantitative easing. As per its defenders, it would be a more proficient approach to build total demand, particularly in a circumstance of a liquidity trap, when nationalised banks have achieved the supposed ‘zero lower bound’.
In the Present conception of helicopter money, we make use of balance sheets of the central bank, of the Treasury, and of the consolidated government, which combines them both.