Pandemic Recession and Helicopter Money: Venice, 1629--1631

TL;DR

This paper examines Venice's 1629-1631 money-financed fiscal stimulus during a famine and plague, highlighting its monetary instability and redistributive effects, akin to modern helicopter money strategies.

Contribution

It provides a historical analysis of a large-scale monetary expansion during a crisis, illustrating its economic and political implications and its resemblance to modern helicopter money.

Findings

The strategy caused monetary instability and was quickly reversed.

It aimed to subsidize affected inhabitants without increasing long-term debt.

The episode reveals redistributive and political economy considerations in macroeconomic policy design.

Abstract

We analyse the money-financed fiscal stimulus implemented in Venice during the famine and plague of 1629--31, which was equivalent to a 'net-worth helicopter money' strategy -- a monetary expansion generating losses to the issuer. We argue that the strategy aimed at reconciling the need to subsidize inhabitants suffering from containment policies with the desire to prevent an increase in long-term government debt, but it generated much monetary instability and had to be quickly reversed. This episode highlights the redistributive implications of the design of macroeconomic policies and the role of political economy factors in determining such designs.