Working Paper

Helicopter Drops and Liquidity Traps

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.

Keywords: Helicopter drops; Central bank independence; Liquidity traps; Zero lower bound;

JEL Classification: E58; E31; E61; E52; E63;

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Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Working Papers

Publication Date: 2023-04-06

Number: 797