The variability of money velocity in a generalized cash-in-advance model
Money is at best a facilitator of wealth exchange. We instead want the goods and services that money can be exchanged for. In working for money, we individuals who comprise the economy are working for what money can be exchanged for.
And talk about. The correct reaction to the previous sentence is for readers to roll their eyes. What a waste of time. With trade always being about products for products, velocity is high where production is high.
Velocity of Money
Producers seek goods and services in return for their production, so the last thing they want is limp, credibility-free money when they 'export' what they create to buyers. It does because the dollar, despite its myriad weaknesses related to instability since , is globally accepted. They know the dollar will command goods and services nearly everywhere. Given the sick-inducing devaluations that have historically defined the Peso, its velocity is logically light.
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Of course it is. No reasonable producer wants a globally rejected currency in return for his production. What a laugh.
Good money that holds its value is used everywhere. Why on earth would a producer accept a junk currency in return for his production?
Thus, this paper investigates velocity's behaviour in the economy of West Malaysia and Singapore from to Results show velocity to be primarily a positive function of the number of bank offices and a negative function of per capita real GDP. The paper concludes that closer observation of underdeveloped economies in which velocity has paradoxically risen with per capita income, might reveal similar institutional changes which have overwhelmed the inverse relation between per capita income and velocity.
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