Fed paper warns on helicopter money risks
Tool appears much less powerful when less realistic elements of model are removed
Research published by the Federal Reserve points to dangers in using helicopter money, or money-financed fiscal programmes, to help economies exit periods of stagnation.
Fed economists William English, Christopher Erceg, and David Lopez-Salido tackle the problem – which has divided thinkers for years – using a New Keynesian framework, presenting their results in a recent working paper. They also adapt the framework to overcome some of its less realistic features.
“Textbook” helicopter money
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