Table of Contents
HELICOPTER MONEY
- It is an unconventional monetary policy tool.
- To inject cash into the economy.
- Through printing large sums of money.
- Distributing it among the general public to stimulate the economic growth.
HOW IT IS DIFFERENT FROM OTHER METHODS?
- Citizen
- RBI & Govt.
BUT HOW TO DO THIS?
- Direct transfers to peoples account.
- Cutting down taxes.
- Government Spending.
THE TERM ‘HELICOPTER MONEY’?
- Well known economist, Milton Freidman introduced the concept of helicopter money in his paper
- The Optimum Quantity of Money in 1960.
- The basic principle behind this is that the central banks want to increase inflation and output.
- Therefore, this assumption implied that the influx of money in the economy will be used to purchase goods and services.
NEGATIVE CONSEQUENCES
- May lead to hyper inflation.
- Rapid Depreciation of Rupee.
- People may keep this money in their savings
WHEN IT SHOULD BE USED?
- Helicopter money is a tool to be adopted during fiscal crises when conventional monetary policies are not efficient enough to help the economy to recover.
- Economies mainly consider it as an alternative to fight back deflation.
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