Helicopter Money as An Option for Monetary Policy in Dealing with Recessions in Iraq

Abstract

In light of the worsening health conditions globally due to the Corona pandemic, and the trend of the global economy towards deflation and stagnation, it is asked how this recession will be faced in light of the negative effects that traditional methods in financing may cause from low interest rates and economies in the liquidity trap, which it causes damage to private investment and increases fears of debt inability to repay. Therefore, many economists are looking to return to the unconventional theoretical approach that Milton Friedman referred to in 1969, which was known as helicopter money, and whose content is concentrated as the last resort of monetary policy to stimulate economic activity. Consequently, this plan is based on the conversion from the traditional current credit system to a new money system backed by trust and reputation. The parties that issue this money are the central banks, and here the issuance of money does not result in a special debt but rather as an asset supported by central banks, but on conditions that this mechanism is not permanent. Likewise, helicopter money is a mechanism for coordinating monetary and fiscal policy together. Accordingly, the research paper is based on the following questions: - How is stimulating aggregate demand and getting out of the crisis by (helicopter money)? What are the requirements or conditions for the success of this mechanism? - Can Iraq and its monetary policy use this mechanism in light of the triple shock the country is going through (Corona pandemic, low oil prices, political crisis)?