A money-financed fiscal stimulus in the euro area: would (all) economies benefit from it?

Abstract

The aim of this paper is to analyze the effects of a money-financed government spending stimulus implemented in the core economies of the eurozone, to test both its efficiency and its distribution between the core and the periphery. We compare these effects to the ones generated by an equivalent government spending shock under a more usual debt-financing regime. The ultimate goal of the analysis is to assess the desirability of ‘helicopter money’ in the eurozone as an instrument to stimulate the economy.