Macroeconomic Effects of Green 'Helicopter' Money

In this study, we explore the potential effects of green "helicopter" money, which the Central Bank distributes to households. In our experiment, the Central Bank distributes green tickets to households, which are of a one-to-one value to the national currency (euro). The tickets can only be used to purchase green goods and expire after one period. Calibrated to France, our simulation indicates that contrary to the traditional consensus that the Central Bank's monetary policies have little effect on pollution reduction, the green "helicopter" money substantially affects pollution reduction. Moreover, we found that this policy adds no inflationary pressure on the price of green goods. The demand of green goods from households first rises owing to the reception of green tickets. Subsequently, the production supply of green goods rises and eventually becomes dominant. Thus, the relative price of green goods compared to brown/polluting goods falls in the medium and long term. This result challenges the conventional view that monetary easing in the green sector leads to inflation and discourages demand. One explanation is that the green "helicopter" tickets work directly on the consumers' demand side, rather than on the firms' side as with many quantitative easings from the Central Bank.Furthermore, we simulated the effects of green "helicopter" money (green tickets) from the government. The government converted a part of its carbon taxation revenue into green tickets, which are given directly to households. Our simulation reveals that compared to the traditional carbon tax, the green ticket from government is a more efficient tool to reduce pollution, with considerably less contractive effects on the economy. Moreover, this policy is more efficient than the government converting carbon taxation into subsidy for Bank's green loans.In France, consumers' demand for green/organic goods rises rapidly, but there is no inflation observed on the price of green/organic goods. Instead, we observed that organic shops are being progressively opened in each residential district and e-organic shops are being launched on the Internet. Moreover, increasingly, organic/green goods are distributed in the traditional supermarkets. The experience of France shows how consumers' motivation triggers the positive demand-supply cycle for green consumption/production, which stabilizes the price level and removes inflationary pressure on the green sector