Helicopter Drops and Japan fs Liquidity Trap
This paper examines the effects of a money-financed fiscal expansion? a helicopter drop?when an economy is in a liquidity trap. It uses a textbook-style model calibrated to fit Japan fs economic slump and deflation as of 2003. According to the results, money-financed transfers totaling 9.4 percent of GDP end the output slump and guide the economy to a steady state with 2 percent inflation. By raising output and inflation, the policy also reduces the ratio of government debt to GDP. The policy f s long-run effects are the same as those of a bond-financed fiscal expansion, but money finance prevents a short-run rise in debt.
Volume (Year): 26 (2008)
Issue (Month): (December)
|Contact details of provider:|| Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103|
Web page: http://www.imes.boj.or.jp/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ime:imemes:v:26:y:2008:p:87-106. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kinken)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.