Monday, January 14, 2013

Paul McCulley and Zoltan Pozsar — Helicopter Money: Or How I Stopped Worrying and Love Fiscal-Monetary Cooperation

ABSTRACT 
During private deleveraging cycles monetary policy will largely be ineffective if it is aimed at stimulating private credit demand. What matters is not monetary stimulus per se, but whether monetary stimulus is paired with fiscal stimulus (otherwise known as helicopter money) and whether monetary policy is communicated in a way that helps the fiscal authority maintain stimulus for as long as private deleveraging continues. Fiscal dominance and central bank independence come in secular cycles and mirror secular private leveraging and deleveraging cycles, respectively. As long as there will be secular debt cycles, central bank independence will be a station, not a final destination.
Global Society of Fellows
Helicopter Money: Or How I Stopped Worrying and Love Fiscal-Monetary Cooperation
Paul McCulley, Chair, GIC Global Society of Fellows and Zoltan Pozsar, Visiting Scholar, GIC Global Society of Fellows
(h/t Anders in a comment at 3spoken)




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