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The COVID-19 Pandemic in a Monetary Schumpeterian Model

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  • Qichun He

    (China Economics and Management Academy, Central University of Finance and Economics, Beijing 100081, China)

Abstract

In this paper, following Blanchard and Fischer (1989), I investigate how the presence of the COVID-19 pandemic¡ªthe increase in the probability of death¡ªmay affect growth and welfare in a scale-invariant R&D-based Schumpeterian model. Without money, the increase in the probability of death has no effect on long-run growth and a negative effect on welfare. By contrast, when money is introduced via the cash-in-advance (CIA) constraint on consumption, the increase in the probability of death decreases long-run growth and welfare under elastic labor supply. Calibration shows that the quantitative effect of an increase in the probability of death on welfare is much larger compared to that on growth.

Suggested Citation

  • Qichun He, 2020. "The COVID-19 Pandemic in a Monetary Schumpeterian Model," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 15(4), pages 626-641, December.
    • Handle: RePEc:fec:journl:v:15:y:2020:i:4:p:626-641
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-011-020-0025-1
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    More about this item

    Keywords

    COVID-19 pandemic; cash-in-advance constraint on consumption; Schumpeterian model; long-run growth and welfare;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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