Understanding all the effects of monetised fiscal deficits (or helicopter money)

We try to identify all the effects of a monetised fiscal deficit (or, equivalently, helicopter money) on the economy. These effects transit via: Changes in interest rates and therefore in investment and production; Changes in the optimal structure of wealth, in particular in demand for transaction and investment money; Changes in the level of wealth and in the value of bondholdings. The sign of the effect on interest rates and production is not ambiguous; that of the effect on wealth and asset prices (equities, etc.) is ambiguous and depends on the size of the response to the fall in interest rates, the optimal weights of the various assets in wealth and demand for transaction money to changes in interest rates. We examine the configurations in which no increase in wealth or asset prices is possible. The evolution of total demand for money plays a central role.