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Extended Ricardian Equivalence Theorem for Helicopter Money

Kim, Minseong (2016): Extended Ricardian Equivalence Theorem for Helicopter Money.

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Abstract

This paper develops the Extended Ricardian Equivalence Theorem for helicopter money. It is shown that helicopter money, or money printing, to finance fiscal spending is inconsistent with existence of an equilibrium under ordinary assumptions used to derive the Ricardian Equivalence theorem. By relaxing some equality constraints into inequality constraints or by an open economy assumption, one may be able to save helicopter money from not being a part of an equilibrium.

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