Monetary finance definition
Monetary finance means running a fiscal deficit (or a higher deficit than would otherwise be the case) which is not financed by the issue of interest-bearing debt, but by an increase in the monetary base. Milton Friedman described this as “helicopter money”, with the government printing dollar bills and then using them to make a lump-sum payment to citizens. Today it could involve either a tax cut or a public expenditure increase which would not otherwise occur. It could be one-off or repeated. It would typically involve the creation of additional deposit rather than paper money, initially in the government’s own current accounts, and then transferred into private deposit accounts either as a tax cut or through additional public expenditure.