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Xiaofei MA (ESSCA School of Management) “Macroeconomic Effects of Green Helicopter Money”

May 30 @ 12:15 pm - 1:30 pm

The Macroeconomics Seminar:
Time: 12:15 pm – 13:30 pm
Date: 30 th of May 2022
Room 3001

Xiaofei MA (ESSCA School of Management) “Macroeconomic Effects of Green Helicopter Money”

Abstract : In this study, we explore the potential effects of green ”helicopter” money, which the Central Bank distributes to households. In our experiment, the Central Bank distributes green tickets to households, which are of a one-to-one value to the national currency (euro). The tickets can only be used to purchase green goods and expire after a specified use. Calibrated to France, our simulation indicates that contrary to the traditional consensus that the Central Bank’s monetary policies have little effect on pollution reduction, the green ”helicopter” money substantially affects pollution reduction. Moreover, we found that this policy adds no inflationary pressure on the price of green goods. The demand of green goods from households first rises owing to the reception of green tickets. Subsequently, the production supply of green goods rises and eventually becomes dominant. Thus, the relative price of green goods compared to brown/polluting goods falls in the medium and long term. This result challenges the conventional view that monetary easing in the green sector leads to inflation and discourages demand. One explanation is that the green ”helicopter” tickets work directly on the consumers’ demand side, rather than on the firms’ side as with many quantitative easings from the Central Bank.