APL (Ajiken Power Lunch)

APL (Ajiken Power Lunch) is a lunchtime workshop open to public, including IDE staffs, visiting research fellows, IDEAS students, outside researchers and graduate students. This workshop provides a platform for presentation of any work in progress where we can discuss in either English or Japanese.

Those who would attend a seminar are asked to announce yourself to receptionists on your arrival at the IDE and to obtain APL Organizers' signature on your admission card after the seminar.

December 7, 2016. (Wednesday) 14：00-15：30

Institute of Developing Economies, Japan External Trade Organization C23 Meeting Room 　

The Economics of Helicopter Money

Major advanced economies, such as the United States, Japan, and several key European countries, are mired in slow economic growth, stagnant real per capita income, and low inflation or deflationary pressures since the global financial crisis. The major central banks have lowered interest rates, undertaken substantial quantitative easing, "credibly" committed themselves to low interest rates for long, and some central banks have even resorted to negative interest rates. Yet aggregate demand and growth in business fixed investments have been disappointing, while nominal wage growth remains tepid. Former Federal Reserve Chairman Ben Bernanke and others have reinvigorated Milton Friedman's notion of "helicopter money" — the central bank's direct transfer of high powered money to households.

The paper critically examines the economics of helicopter money. It is argued that helicopter money may not be sufficient to overcome liquidity trap. Instead what is required is the combination of (i) authentic Keynesian policies that provide a floor on real disposable income and employment and (ii) Schumpeterian policies that fosters "creative destruction" in the private sector through appropriate investment in public infrastructure, innovation, research & development, the creation of new products and processes, and the evolution of the industrial structure. The solution to a liquidity trap lies in the combination of effective fiscal and employment policy and the sustained effort to boost the economy’s productivity, raise its potential for growth and enrich the quality of social and economic life. Both Keynesian and Schumpeterian policies are required for the renewal of growth and prosperity, rather than the mere expansion of the central bank's high powered money including through its direct availability to households.

Dr. Tanweer Akram (Director, Global Public Policy and Economics, Thrivent Financial)

Lei LEI

English