A review of helicopter money

Abstract

Over the years before the 2020 pandemic crisis, monetary financing and helicopter money were becoming increasingly popular. Since helicopter money is a radical and controversial instrument of economic policy, many economists still dismiss it, while others argue it might be useful particularly in deflationary economies facing aggregate demand shortage. This paper aims to provide an extensive review of recent literature on helicopter money and to the best of our knowledge delivering the most comperhensive review of studies involving its effectiveness. Other goals include a discussion of its advantages and limitations and potential problems among solutions that are linked to this tool. There is certain evidence such a policy can act countercyclically under given conditions without notable side effects. No convincing proof was found helicopter money would ultimately lead to uncontrollable inflation. Potential problems that come before, during, and after helicopter money implementation have attainable solutions. Policymakers have technical knowledge for its implementation. What is missing is a broader consensus and political willingness to implement the measure and find a set of rules and responsibilities that prevent its abuse. More academic and business discussion is needed to shed light on both positive and negative consequences that might arise while answering the question of whether it is time to take a different path in economic policy since helicopter money involves more cooperation between monetary and fiscal authorities and requires particular institutional changes.