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Helicopter Drops and Liquidity Traps

Author

Listed:
  • Manuel Amador
  • Javier Bianchi

Abstract

We show that if the central bank operates without commitment and faces constraints on its balance sheet, helicopter drops can be a useful stabilization tool during a liquidity trap. With commitment, even with balance sheet constraints, helicopter drops are, at best, irrelevant.

Suggested Citation

  • Manuel Amador & Javier Bianchi, 2023. "Helicopter Drops and Liquidity Traps," Working Papers 797, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmwp:95949
    DOI: 10.21034/wp.797
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    More about this item

    Keywords

    Helicopter drops; Central bank independence; Liquidity traps; Zero lower bound;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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