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Helicopter money in Japan could be a game-changer

Understanding the market implications of Helicopter Money

The BOJ has promised that its September meeting will include a "comprehensive review" of its monetary stimulus program. Last week (August 18th) an advisor to PM Abe hinted that this would mean bold action being taken - reviving speculation that this could even include some form of monetary financing, or "helicopter money".

Japanese helicopter drop

What is "helicopter money", what are the pros and cons, and what would be the implications for global markets if the BOJ were to go down this path? Below, we have curated some of the best papers, all of which are free to access as a member of Savvy Investor.

Cost-benefit analysis of helicopter money (Richard Koo of Nomura, Aug 2016)
In a personal view, respected Nomura economist Richard Koo examines four different versions of so-called "helicopter money" and explores the implications of each.

What tools does the Fed have left? Helicopter money (Ben Bernanke, April 2016)
In this blog for the Brookings Institute, former Fed Chairman Ben Bernanke examines the tools currently at the Fed's disposal - and the desirability and implications of using them.

Demystifying Monetary Finance (Adair Turner, August 2016)
The Bank of Japan’s review of its monetary stimulus program promised for September has revived expectations it could adopt some form of “helicopter money,” printing money for government spending to spur inflation.

Helicopters 101: your guide to monetary financing (Deutsche Bank, April 2016)
Would helicopter money work? Some worry that monetary finance is bound to produce hyperinflation; others argue that it would be no more effective than current policies. Both cannot be right.

The simple analytics of Helicopter Money: why It works – always (Willem Buiter, Aug 2014)
In this 20 page special report, strategists from Deutsche Bank examine four different types of monetary financing, the historical experience, and market implications.

Why helicopter money could be a game-changer (HSBC, May 2016)
"Helicopter money" is frequently misunderstood though frequently talked about. This article brings together the opinions of leading economists on helicopter money since 2010.

Is Helicopter Money ready to take flight? (Lord Abbett, Aug 2016)
Economist Biagio Bossone argues that while helicopter money is a "free lunch" policy option available to policymakers to help stagnating and heavily indebted economies, it does not imply a surrender of monetary policy.

Helicopter money: views of leading economists (Vox EU, April 2016)
With other measures to lift growth proving ineffective, developed economies, especially Japan, may be considering monetary financed fiscal programs.

How Helicopter Money Works (Columbia Threadneedle, May 2016)
Adair Turner aims to assess the possible and appropriate role for monetary finance of fiscal deficits, arguing that all the really important issues are actually political ones.

Why Helicopter Money is a “Free Lunch” (Roubini Economonitor, June 2016)
This article argues that the implications of "helicopter money" are not fully appreciated. Achieving the desired benefits of this "nuclear option" would require giving up on conventional interest rate policy forever.

Helicopter Money: The illusion of a "Free Lunch" (Vox EU, May 2016)
Willem Buiter argues that deflation or secular stagnation are unnecessary - they are simply policy choices. He analyses Milton Friedman’s ‘helicopter money' and sets out three conditions which must be met in order for this policy to boost aggregate demand.