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Crisis and the Role of Money in the Real and Financial Economies - An Innovative Approach to Monetary Stimulus. / Simmons, Richard; Dini, Paolo; Culkin, Nigel; Littera, Guiseppe.

In: Journal of Risk and Financial Management, Vol. 14, No. 3, 129, 20.03.2021.

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@article{b0d2fa223fa64db191f253926d3bc241,
title = "Crisis and the Role of Money in the Real and Financial Economies - An Innovative Approach to Monetary Stimulus",
abstract = "{\textquoteleft}Financial crisis{\textquoteright} is sometimes regarded as synonymous with {\textquoteleft}economic crisis{\textquoteright}, but this is an oversimplification and risks missing the feedback loops between the financial and real economies. In this paper, the role of money is revisited in the context of distinguishing the real economy from the financial economy. A theoretical framework is developed to explain how endogenous (bank credit) and exogenous (quantitative easing, QE) money creation feed into the real and financial economies. It looks at how the velocity of monetary circulation varies between the two economies and across asset types within the financial economy. Monetary transmission mechanisms are set into a framework that helps explain how QE stimulus risks combining asset price bubbles with poor growth in the real economy. The real economy transmission mechanism of {\textquoteleft}helicopter money{\textquoteright} is given context, enabling an assessment of the efficacy of both the QE and helicopter money policy routes. Finally, we present a new additional type of monetary transmission, {\textquoteleft}Smart Helicopter Money{\textquoteright}, to deliver monetary stimulus to innovators, SMEs and high-growth firms via both complementary currencies and a modified form of QE in order to achieve proportionally greater impact on the real economy.",
keywords = "Monetary Policy, Financial Crisis, Helicopter Money, Real Economy, Financial Economy, Quantitative Easing, Complementary Currency, Velocity of Circulation, Innovation, Economic growth",
author = "Richard Simmons and Paolo Dini and Nigel Culkin and Guiseppe Littera",
note = "{\textcopyright} 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/). ",
year = "2021",
month = mar,
day = "20",
doi = "10.3390/jrfm14030129",
language = "English",
volume = "14",
journal = "Journal of Risk and Financial Management",
issn = "1911-8074",
publisher = "MDPI",
number = "3",

}

RIS

TY - JOUR

T1 - Crisis and the Role of Money in the Real and Financial Economies - An Innovative Approach to Monetary Stimulus

AU - Simmons, Richard

AU - Dini, Paolo

AU - Culkin, Nigel

AU - Littera, Guiseppe

N1 - © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).

PY - 2021/3/20

Y1 - 2021/3/20

N2 - ‘Financial crisis’ is sometimes regarded as synonymous with ‘economic crisis’, but this is an oversimplification and risks missing the feedback loops between the financial and real economies. In this paper, the role of money is revisited in the context of distinguishing the real economy from the financial economy. A theoretical framework is developed to explain how endogenous (bank credit) and exogenous (quantitative easing, QE) money creation feed into the real and financial economies. It looks at how the velocity of monetary circulation varies between the two economies and across asset types within the financial economy. Monetary transmission mechanisms are set into a framework that helps explain how QE stimulus risks combining asset price bubbles with poor growth in the real economy. The real economy transmission mechanism of ‘helicopter money’ is given context, enabling an assessment of the efficacy of both the QE and helicopter money policy routes. Finally, we present a new additional type of monetary transmission, ‘Smart Helicopter Money’, to deliver monetary stimulus to innovators, SMEs and high-growth firms via both complementary currencies and a modified form of QE in order to achieve proportionally greater impact on the real economy.

AB - ‘Financial crisis’ is sometimes regarded as synonymous with ‘economic crisis’, but this is an oversimplification and risks missing the feedback loops between the financial and real economies. In this paper, the role of money is revisited in the context of distinguishing the real economy from the financial economy. A theoretical framework is developed to explain how endogenous (bank credit) and exogenous (quantitative easing, QE) money creation feed into the real and financial economies. It looks at how the velocity of monetary circulation varies between the two economies and across asset types within the financial economy. Monetary transmission mechanisms are set into a framework that helps explain how QE stimulus risks combining asset price bubbles with poor growth in the real economy. The real economy transmission mechanism of ‘helicopter money’ is given context, enabling an assessment of the efficacy of both the QE and helicopter money policy routes. Finally, we present a new additional type of monetary transmission, ‘Smart Helicopter Money’, to deliver monetary stimulus to innovators, SMEs and high-growth firms via both complementary currencies and a modified form of QE in order to achieve proportionally greater impact on the real economy.

KW - Monetary Policy

KW - Financial Crisis

KW - Helicopter Money

KW - Real Economy

KW - Financial Economy

KW - Quantitative Easing

KW - Complementary Currency

KW - Velocity of Circulation

KW - Innovation

KW - Economic growth

U2 - 10.3390/jrfm14030129

DO - 10.3390/jrfm14030129

M3 - Article

VL - 14

JO - Journal of Risk and Financial Management

JF - Journal of Risk and Financial Management

SN - 1911-8074

IS - 3

M1 - 129

ER -