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Gries, T., Mitschke, A. Extraordinary Times Require Extraordinary Action: Boosting European Demand by Means of Investment Helicopter Money. Credit and Capital Markets – Kredit und Kapital, 54(2), 137-172. https://doi.org/10.3790/ccm.54.2.137
Gries, Thomas and Mitschke, Alexandra "Extraordinary Times Require Extraordinary Action: Boosting European Demand by Means of Investment Helicopter Money" Credit and Capital Markets – Kredit und Kapital 54.2, 2021, 137-172. https://doi.org/10.3790/ccm.54.2.137
Gries, Thomas/Mitschke, Alexandra (2021): Extraordinary Times Require Extraordinary Action: Boosting European Demand by Means of Investment Helicopter Money, in: Credit and Capital Markets – Kredit und Kapital, vol. 54, iss. 2, 137-172, [online] https://doi.org/10.3790/ccm.54.2.137
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Extraordinary Times Require Extraordinary Action: Boosting European Demand by Means of Investment Helicopter Money

Gries, Thomas | Mitschke, Alexandra

Credit and Capital Markets – Kredit und Kapital, Vol. 54 (2021), Iss. 2 : pp. 137–172

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Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.54.2.137
Language
English
Pages
36
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Author Details

Prof. Dr. Thomas Gries, Paderborn University, Chair of International Growth and Business Cycle Theory, Warburger Straße 100, 33098 Paderborn.

Alexandra Mitschke, Paderborn University, Chair of International Growth and Business Cycle Theory, Warburger Straße 100, 33098 Paderborn.

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Abstract

This theoretical contribution analyzes remaining monetary policy tools and their ability to reestablish sound macroeconomic conditions in the euro area. Motivated by the observation of a lack of investment in the macroeconomy and subdued inflation, we review current monetary policy challenges and emphasize the major failure of traditional transmission channels. While interest rates and asset prices often respond to central bank tools, the effects on the real economy, specifically on investments, are often not observable. We suggest Investment Helicopter Money as a tool to directly strengthen investment and boost aggregate demand. This monetary impulse is found to offer a direct real effect without crowding-out investment or rising debt levels. Most importantly, we discuss necessary institutional arrangements and contrast the suggested tool with a simple monetary or fiscal impulse.

Table of Contents

Section Title Page Action Price
Thomas Gries / Alexandra Mitschke: Extraordinary Times Require Extraordinary Action: Boosting European Demand by Means of Investment Helicopter Money 1
Abstract 1
I. Introduction: Challenges of Monetary Policy 2
II. Transmission Channels and Real Effectiveness 3
1. Conventional Monetary Policy 3
a) Mechanics and Adjustment Time 3
b) Shortcomings and Restrictions 5
c) Empirical Appraisal 5
2. Unconventional Monetary Policy 6
a) Mechanics and Adjustment Time 7
b) Shortcomings and Restrictions 8
c) Empirical Appraisal 8
III. Helicopter Money 1
1. Traditional Helicopter Money 1
a) Mechanics and Adjustment Time 1
b) Shortcomings and Restrictions 1
2. Investment Helicopter Money 1
a) Mechanics of Investment Helicopter Money 1
b) Shortcomings and Restrictions 1
3. Comparisons of Helicopter Money with Other Policy Tools 1
a) Helicopter Money vs. CMP 1
b) Helicopter Money vs. QE 1
c) Helicopter Money vs. Traditional Fiscal Stimulus 1
IV. Discussion 2
1. Concepts: Fiscal or Monetary Policy? 2
2. Central Bank Independence 2
V. Concluding Remarks 2
References 2
Appendix: Timeline of QE in the Eurozone 3

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