Photographer: Dean Hutton/Bloomberg

Helicopter Money Would Boost Savings, Not Consumer Spending

Study finds stimulative effect of free money may be overrated
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Helicopter money — the direct transfer of cash from central banks to consumers — has been touted as a radical form of stimulus to boost moribund inflation. A study by ING suggests it may not have much of an impact.

If people were to receive 200 euros ($220) in their bank account each month for a year with no strings attached, respondents in 12 European countries said they’d be more likely to save the cash than spend it. The results are based on a survey among some 12,000 consumers conducted by Ipsos from June 3-24 using internet-based polling.

Only 26 percent said they’d spend most of the money, while 52 percent said they’d save it, invest it or leave the bulk untouched. Fifteen percent said they’d pay back debt.


“If people behaved in the way they’ve responded to the survey, you’d have to question the effectiveness of this form of delivery,” said Ian Bright, a senior economist at ING. He said an alternative would thus be giving money to the state for infrastructure spending, tax cuts or for paying down national debt — an option irrelevant for the European Central Bank, which is forbidden to finance governments.

While the whole idea of helicopter money may seem bizarre, the concept — dreamed up by Nobel laureate Milton Friedman nearly fifty years ago — is being seriously debated by economists, after the trillions of dollars central banks around the world have pumped into financial markets in recent years have failed to revive growth and inflation. Policy makers haven't signaled that they consider it a valid tool. QuickTake Helicopter Money

ECB President Mario Draghi called it a “very interesting concept” earlier this year, though he and his colleagues say they haven’t discussed it as an option. 

Bank of Japan Governor Haruhiko Kuroda has repeatedly ruled out helicopter money, arguing it is not under consideration and is prohibited by current law, while Bank of England Governor Mark Carney called it a “flight of fancy.”

--With assistance from Enda Curran and Alice Baghdjian.

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