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;
File(s): File format is application/pdf https://www.minneapolisfed.org/research/wp/wp797.pdf
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Working Papers
Publication Date: 2023-04-06