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The COVID-19 Pandemic in a Monetary Schumpeterian Model

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  • He, Qichun

Abstract

In this paper, we investigate how the presence of the COVID-19 pandemic---the increase in the probability of death, following Blanchard and Fischer (1989)---may 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 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

  • He, Qichun, 2020. "The COVID-19 Pandemic in a Monetary Schumpeterian Model," MPRA Paper 101965, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101965
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    1. Mou Rani Sarker, 2021. "Labor market and unpaid works implications of COVID‐19 for Bangladeshi women," Gender, Work and Organization, Wiley Blackwell, vol. 28(S2), pages 597-604, July.

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    More about this item

    Keywords

    the COVID-19 pandemic; cash-in-advance constraint on consumption; Schumpeterian model;
    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

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