Helicopter money in a standard new keynesian model: modelling and simulation

• Autor(a) principal: Gomes, Ivo Inácio
• Data de Publicação: 2017
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/15999
• topic: Monetary policy; DSGE models; Helicopter Money; Macroeconomics; Política monetária; Macroeconomia; Dinheiro; Inflação; Modelos DSGE; "Dinheiro de helicóptero"

Helicopter money is an extremely controversial topic that has been gaining a lot of attention over the last fiveve years or so. In this dissertation I will develop a DSGE model that attempts to explain how this particular form of money creation may afect in‡ation and the output gap. The model presented here characterizes helicopter money as permanent money supply and exploits the consequences of the central bank constraining its capacity to tighten monetary policy in the future by choosing a contemporaneous increase in helicopter money. The main factors behind the behavior of the output gap and infation are explained by the impact of this constraint upon the formation of future in‡ation and consumption expectations. The results lead us to the conclusion that for helicopter money to be considered as a viable policy option, the impact of the interest rate constraint on expected future consumption needs to be high enough so that it counter-balances its effect on expected future inflation.