Covid-19 Helicopter Money: Economics and Politics


In a pandemic recession an extraordinary monetary policy – helicopter money – can be considered. If we define helicopter money as a monetization of irredeemable fiscal transfers to citizens that produces losses in the central bank balance sheet, and an independent central bank acts as a long-sighted policymaker, an optimal helicopter monetary policy can be identified. Yet, if the government in charge is made up of career-concerned politicians and citizens are heterogenous, the policy mix will produce distributional effects, and conflicts between politicians and central bankers will be likely. Political pressures will arise and the optimal helicopter money option will be less likely. The framework is applied in a discussion of the economics and politics of issuing COVID-19 perpetual bonds with the European Central Bank as the buyer.