The direct distribution of money to households, or helicopter money, by the European Central Bank (ECB) would make it possible to revive demand without widening public deficits in the event of a future crisis, defends Wednesday in a note the Economic Analysis Council (CAE ).
Starting from the observation that the ECB has never succeeded in reaching its target of inflation around 2% since 2015, the economists of this body dependent on Matignon wondered what tools were still at its disposal, after the massive buybacks of public and private debt, which nonetheless made it possible to avoid deflation.
The authors also took into account the undesirable effects of the ECB’s expansionary monetary policy, in particular the inflation of the price of assets, held in large majority by the richest, thus widening the inequalities.
The helicopter money “would be the equivalent of what the United States did, of the check sent by the Biden administration” to the American population but the device would be implemented by the central bank, and not by the government, economist Eric Monnet, co-author of the note, detailed during a press presentation.
Each individual would receive the same amount, and children under 15 years of age half as much as an adult.
Payments would take the form of checks, prepaid cards or virtual wallets with passcode, all time-limited so they are spent and not saved.
According to calculations by economists, the measure would increase the inflation rate by 0.5 percentage point for a distribution of money equivalent to 1% of the euro area’s GDP, or 120 billion euros or 385 euros per individual.
To raise the inflation rate from 1% to 2%, it would therefore be necessary to distribute twice as much, or 240 billion or 770 euros per person.
It is “not an instrument for exiting the crisis” for the coming months, but a “resilience instrument” to be used “in the event of a persistent demand deficit”, while inflation reaches its target, he said. Philippe Martin, Deputy Chairman of the CAE and co-author of the note.
“Our proposal is compatible with the current statutes” of the ECB and would not require a revision of the European treaties, specified Xavier Ragot, third co-author and president of the OFCE, who does not believe in a return of inflation in the post-crisis period, even if “there will be very strong relative price movements” as in commodities today.
boc / mhc / els
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