Vse več ekonomistov predlaga, da ECB izvede “QE za ljudi” s t.i. “helikopterskim denarjem“. To pomeni, da bi ECB vsakemu odraslemu prebivalcu evrskega območja na račun nakazala neko vsoto. John Muellbauer (Oxford University) predlaga, da ECB vsakemu izmed 275 milijonov odraslih posameznikov v državah evro območja nakaže po 500 evrov. Po njegovih izračunih bi posamezniki med 40% in 60% tega “darila” porabili, kar bi seveda vplivalo tako na rast BDP kot na rast cen. Brez upoštevanja multiplikatorskih učinkov, bi takšno “Božičkovo darilo ECB” enkratno dvignilo BDP za 1.1% do 2% v državah, kot so Španija, Portugalska in Grčija, ter za 0.5% v Nemčiji.
Več v ponedeljek v Primorskih novicah
Clearly, the ECB must develop a strategy that works in the Eurozone’s unique system, instead of attempting to follow the Fed’s lead. Such a strategy should be based on Friedman’s assertion that ‘helicopter drops’ – printing large sums of money and distributing it to the public – can always stimulate the economy and combat deflation. But, in order to maximise the impact of such an operation, the ECB would also have to find a way to ensure fair distribution.
One simple solution would be to distribute the funds to governments, which could then decide how best to spend them in their countries. But the EZ’s rule against using the ECB to finance government spending bars this approach.
A more reasonable option would be to provide all workers and pensioners with social-security numbers (or the local equivalent) with a payment from the ECB, which governments would merely aid in distributing. Another alternative would be to use the electoral register, a public database that the ECB could use independently of governments. Of the roughly 275 million adults in the Eurozone, some 90% are on the electoral register. Nothing in EZ law forbids the ECB from undertaking such an independent action.4
There is an important difference between the ECB implementing a €500 per-adult-citizen hand-out as part of monetary policy and governments doing this as traditional fiscal policy. Economists have long worried about myopic politicians over-spending, for example, just before an election in order to influence the voters and thus creating a ‘political’ business cycle, or simply perpetually spending too much, and as a result running too high government deficits. That is an important reason why the ECB is not allowed to directly finance government spending. But it is quite a different matter for an independent central bank, subject to its governing council and the representation of different countries on that council, to directly hand out cash to households as part of its method of meeting its inflation mandate. That is why I would classify this as monetary policy and not just a devious way of by-passing Eurozone rules.
Would it work? Evidence on the spending impact
In 2001 and 2008 there were tax rebates in the US, carefully studied by economists. A study of the 2001 rebate by Johnson et al. (2006) suggests between 20 and 40 % was spent in the quarter in which the cash was received – and about another third in the quarter afterwards – and the authors looked only at non-durable spending. The study of the 2008 rebate concluded that “Households spent 12-30% (depending on specification) of their payments on nondurable goods during the three-month period of payment receipt, and a significant amount more on durable goods, primarily vehicles, bringing the total response to 50-90% of the payments”, see Parker et al. (2013). In an Australian study of the 2009 tax rebate, called a ‘bonus’, Leigh (2012) suggests around 40% was spent in the quarter of receipt.
Such evidence contradicts simple textbook versions of the permanent income hypothesis of consumption. In our Kendrick Prize winning paper (Aron et al. 2012), we find time series evidence for Japan, the US, and the UK that the marginal propensity to spend out of permanent income is between about 40 and 60%, and not 100%. This is confirmed for Germany by Geiger et al. (2014) and for France by Chauvin and Muellbauer (2013). The implication is that between 40 and 60% of a surprise transfer of €500 would be spent fairly quickly.5 The US studies find evidence of heterogeneity between households, with poorer households and those with mortgage debt having higher spending propensities.
This would suggest that in Germany, where many households already have a lot in their saving accounts, the spending impact could be less than in the US but that, in Spain, Portugal, and Greece, where many households are cash-poor, the effects would be as large or larger as those in the US. I would, therefore, expect between 1.1% to 2% of GDP effects in Spain, Portugal, and Greece but probably as low as 0.5% in Germany.6
Beyond lifting the Eurozone economy out of deflation, such an initiative would have massive political benefits, as it would reduce resentment toward European institutions, especially in struggling countries like Spain, Portugal, and Greece, where an extra €500 would have a particularly strong impact on spending. In this way, the ECB could prove to disgruntled citizens as well as investors that it is serious about meeting its inflation target, and help to stem the rise of nationalist parties.
The arguments against
- Like other types of helicopter money this proposal would be costly from the point of view of a public sector balance sheet combining the ECB with governments. Since households can see this clearly, they will increase their private savings to offset this cost and neutralise the addition to base money.
The first point to make is that the overwhelming evidence cited above against the simple form of the permanent income hypothesis implies that, even if the basic accounting proposition were true, we can reject the hypothesis that households ‘can see this clearly’.7 Secondly, as Buiter (2014) shows, the objection is highly implausible even with full visibility. As long as money yields services such as transactions utility or liquidity services, and as long as households regard the addition as irreversible, household expenditure will increase. Such a helicopter drop relaxes the government budget constraint – unless an irrationally hair-shirted government insists on tightening fiscal policy to offset the helicopter drop.8 Indeed, the additional tax revenue from the initial round of spending increases and from the multiplier effects of the additional employment, income, and spending it generates will actually improve the government budget constraint.9
- A second argument against is the possibility that the proposal could be subject to moral hazard of two types. First, the over-leveraged private sector would back off its efforts to de-leverage on the expectation that money printing would always rescue it from the consequences of its imprudence, which would increase future risks. Secondly, highly indebted EZ governments would step back from unpopular fiscal reforms.
The best way to de-leverage is to improve growth and the immediate effect of the policy is to improve both private and public sector balance sheets. Within the context of a highly disciplined inflation targeting policy it is unlikely that private sector expectations would be shifted in this direction any further than monetary policies pursued to date might already have done so. Structural reforms of labour and product markets should have priority over fiscal austerity since they address problems of competitiveness and growth. In principle, the ECB could make the €500 per adult conditional on credible reform commitments.
- It will undermine ‘faith in the currency’.
This can only mean that the proposal will somehow lead to high future inflation. On the cusp of deflation and with the EZ in deep stagnation, this makes little sense. Maintaining the credibility of its inflation target is a sure-fire way for the ECB to prevent such risks.
- It will undermine the incentive to work.
High unemployment in the Eurozone is not the result of people simply being work shy or not wanting to work, much more a result of the jobs not being there.
- Handouts to poor people who ‘don’t deserve it’ are unethical.
This argument neglects that conventional monetary policy and QE involves raising the prices of assets, which benefits the people who own the wealth. Some members of elites see this as a ‘natural’ benefit, but resist offering the same benefit to the poor. The rise of populist anti-euro parties is part of the popular response to this distorted point of view.
After years of austerity, infighting, and unemployment, it is time to implement a QE programme that delivers what Europe needs.
Vir: John Muellbauer, VoxEU