Against a backdrop of subpar economic growth, and with low oil prices acting as a headwind to inflation, central banks have tried to convince increasingly sceptical investors that they are not out of options to reflate. In this context, “helicopter money” has become more widely discussed.

Helicopter money is associated with the idea of a permanent increase in the money base achieved through a direct transfer of cash to the public (a metaphorical drop of banknotes from the sky), circumventing banking channels, or through overt financing of the fiscal deficit by the central bank. In this way, the public would see that the higher government spending/lower taxes were financed via the printing press, without involving lower spending or higher taxes in the future to repay the debt.

Enthusiasm for more fiscal action when policy rates appear to have reached their lower bound is understandable and supported by economic analysis. What is often missed is that, to some degree, monetary and fiscal policies are already reinforcing one another. This may not be in ways as obvious as advocates of helicopter drops would like, but provides more stimulus than is recognised.