Advancing the Monetary Policy Toolkit through Outright Transfers

Abstract

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Fighting Inflation More Effectively Without Transferring Central Banks’ Profits to Banks

“…The two-tier system consists in imposing non-interest-bearing minimum reserve requirements on part of the bank reserves. The bank reserves exceeding the minimum requirement (excess reserves) would then be remunerated as they are today (for similar proposals for a two-tier system, see Whelan (2021), Buetzer(2022), van Lerven and interest rate Demand and supply Supply Demand (+ req. reserves) Demand Caddick(2022), and Tucker( 2022)); see also Angeloni (2023) for a proposal not to remunerate bank reserves).…”

Is the Time Ripe for Helicopter Money? Growth Impact and Financial Stability Risks of Outright Monetary Transfers

“…Technological progress in the field of digital technologies, and specifically the development of blockchain, have finally made "helicopter money" a real policy option for central banks and not anymore a mere thought experiment. As Buetzer (2022) puts it, "Outright Monetary Transfers" would now be feasible, in the sense of a direct transfer of resources from the central bank to firms and households. Such a policy would be engendered in the issuance of central bank Digital Currencies (CBDCs), namely "a digital form of central bank money that is widely available to the general public" (Federal Reserve, 2022a).…”

“…Kappes 2021). Even before the recent move towards more restrictive monetary stances (ostensibly caused by inflation spikes), mainstream economists were already questioning the effectiveness of persistent "unconventional" monetary stimulus and widely recognized some of its drawbacks, such as the negative impact on income inequality (most recently and in connection to CBDCs, see Buetzer, 2022; for a review see, Kappes, 2021). Indeed, both mainstream and heterodox contributions have found evidence of negative side effects of QE (e.g.…”

Measuring the Effect of Income Inequality, Financial Inclusion, Investment, and Unemployment, on Economic Growth in Africa: A Moderating Role of Digital Financial Technology

“…Generally, monetary policy tightening has been followed by a reduction in fiscal support, which had previously supported household disposable incomes (Bützer, 2023;Vollmer, 2022;Yiu, 2023). In broad terms, nominal policy rates are currently above pre-pandemic levels in both developed and emerging market economies, as well as in developing nations.…”