« Minority Mortgage Market Experiences During the Financial Crisis | Main | Links for 8-23-14 »

Friday, August 22, 2014

'Three Conditions Must be Satisfied for Helicopter Money Always to Boost Aggregate Demand'

David Keohane at FT Alphaville:

Buiter on helicopter drops: Some further, further reading on Friday — a new paper from Citi’s Willem Buiter, on why helicopter drops of money always work. From the abstract...:

Three conditions must be satisfied for helicopter money always to boost aggregate demand. First, there must be benefits from holding fiat base money other than its pecuniary rate of return. Second, fiat base money is irredeemable – viewed as an asset by the holder but not as a liability by the issuer. Third, the price of money is positive. Given these three conditions, there always exists – even in a permanent liquidity trap – a combined monetary and fiscal policy action that boosts private demand – in principle without limit. Deflation, ‘lowflation’ and secular stagnation are therefore unnecessary. They are policy choices.

The full paper is here.

    Posted by on Friday, August 22, 2014 at 10:10 AM in Economics, Monetary Policy | Permalink  Comments (40)

          


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.