Helicopter Drop of Money - Is It Feasible in Practice?
|Author:||Bc. Nela Gábrišová|
|Year:||2016 - summer|
|Leaders:|| doc. Mgr. Tomáš Holub Ph.D.
|Work type:|| Bachelors
|Awards and prizes:|
|Abstract:||The main goal of this thesis is to discuss the famous Milton Friedman’s concept
of Helicopter Drop of Money in context of its applicability in the real world as a
possible solution to liquidity trap. For better understanding, the thesis briefly describes
conduct of traditional and unconventional monetary policies. Key focus is
put on describing assumptions necessary for the concept to yield desirable economic
outcomes, and on detailed analysis of periods when zero lower bound on nominal
interest rates is binding. Furthermore, roles of agents involved in execution of the
concept, and important channels of transmission process are discussed from idealised
theoretical view to real world possibilities of feasible execution. Additionally, practical
experience with direct cash distribution in Australia, and with quantitative
easing programmes in Japan and the USA are explained. The last part analyses
effects of increased monetary base on CPI inflation, money multiplier M2, and GDP
in Japan and the USA using vector autoregression.