The COVID-19 Pandemic in a Monetary Schumpeterian Model

Qichun He

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2020, vol. 15, issue 4, 626-641

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.

Keywords: COVID-19 pandemic; cash-in-advance constraint on consumption; Schumpeterian model; long-run growth and welfare (search for similar items in EconPapers)
JEL-codes: E52 O42 O47 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Working Paper: The COVID-19 Pandemic in a Monetary Schumpeterian Model (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:15:y:2020:i:4:p:626-641

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