Money, Growth, and Welfare in a Schumpeterian Model with the Spirit of Capitalism

Qichun He, Yulei Luo (), Jun Nie and Heng-Fu Zou ()

Review of Economic Dynamics, 2023, vol. 47, 346-372

Abstract: According to Schumpeter (1934), entrepreneurs are driven to innovate not just for the fruits of success but also for success itself. This description of entrepreneurship echoes Weber's (1904-05, German; 1958) description of the "spirit of capitalism," which states that people enjoy the accumulation of wealth regardless of its effect on smoothing consumption. This paper explores the implications of the spirit of capitalism on monetary policy, growth, and welfare in a Schumpeterian growth model. Different from the existing literature, we show that money is not superneutral in the long run and it could promote economic growth when the spirit of capitalism is strong. Furthermore, we show the optimal nominal interest rate decreases with the strength of the spirit of capitalism, potentially supporting a negative interest rate. (Copyright: Elsevier)

Keywords: spirit of capitalism; cash-in-advance; Schumpeterian model; monetary policy; growth and welfare (search for similar items in EconPapers)
JEL-codes: E52 O42 O47 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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DOI: 10.1016/j.red.2022.03.001

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