Real interest payments are below growth, so the ratio of national debt to GDP falls, even if loans are taken for interest payments and the debt is not amortised. Helicopter money as a means of funding fiscal policy stimulation Another idea brought up is for the central bank to fund a fiscal policy expansion with the banknote presses. It is difficult to find an exact definition of helicopter money, but the important questions concern which part of it is fiscal policy, which part is monetary policy and which part is coordination. The basic idea plays with fire a little: everybody knows that a failed monetary policy in which control has been lost of the banknote presses can easily end in hyperinflation – history gives us several clear examples of this. But in these examples, the initiative usually comes from elsewhere: central government puts pressure on the central bank to fund an expansionary fiscal policy as tax revenues are insufficient and credit arrangements are limited. The discussion today instead concerns a situation where inflation is too low and monetary policy needs the assistance of a more 16 See also Posen (2020) for a discussion of the interest rate peg introduced by the Bank of Japan. See Coenen et al. (2012), who estimate the so-called fiscal policy multiplier with and without a lower bound for the policy rate. 17  17 [25]  expansionary fiscal policy.
We have been able to affect expectations for the following years through our communications. Other central banks that have not traditionally engaged in this type of communication have, as I mentioned earlier, experimented with different forms of rough ‘triggers’ of various kinds. The academic background to the concept is the insight that expectations of future policy rates are at least as important as their current level when it comes to affecting investment and consumption decisions. In normal cases, the central bank is assumed to be able to influence expectations satisfactorily through its systematic monetary policy. But when the policy rate reaches its lower bound, it is possible to communicate an intention to diverge from normal behaviour and keep the rate low for a longer period and thus substitute, to a certain extent, for an immediate policy rate cut. There has been, however, some discussion of how effective such communication actually is, particularly over longer horizons. 12 The Riksbank's method provides a more complete picture of how we see the situation and the development of the economy. But other ways of communicating about the future have their advantages. One variant of this is the state-contingent US approach: saying that the policy rate will not be raised until the outcome for inflation has reached 2 per cent. 13 In situations where the market does not share the Riksbank’s view of the development of inflation, the US way of communicating can provide more information than inflation and interest rate forecasts.