Fiscal and monetary responses to the COVID-19 pandemic: Some thoughts for developing countries and the international community

These historically unprecedented times require unconventional responses. Yes, there are several examples of countries that in the past have abused “unconventional monetary approaches,” leading to high bouts of inflation, strong devaluations, balance of payment crises, and corruption. Yet, with prudence, these approaches should now be used to finance specific public expenditures, such as cash transfers and safety nets for the poor and vulnerable, and certain public investments, and to keep firms operating. In any case, money always enters into the economy through specific actors (at present, mainly the owners of the assets being bought by the central banks), and not by equally endowing each citizen with the same amount of currency (as in Milton Friedman’s parable of “helicopter money”; Friedman 1969). A universal income would do the latter, and some of the recent rescue packages in developed countries moved in that direction. The methods suggested here would ultimately make the channels through which an expanded money supply gets into the economy more democratic.