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August 27, 2020

Bank of Canada Should Rule Out “Helicopter Drop” Approach

  • The Bank of Canada should avoid going direct with cash for consumers to influence economic activity, such as through a helicopter drop or creating a standing facility.
  • Authors Thorsten V. Koeppl and Jeremy Kronick analyze “going direct,” an alternative monetary policy tool the Bank of Canada could use to disburse cash and stimulate demand, and outline where the risks lie in this approach. 
  • Going direct would open the door to political interference with monetary policy, even under a well-designed system, conclude Koeppl and Kronick.