Alleviating Poverty through Job Creation: Quantity Equation of Money may Come into Play

This study proposes a new approach to combat global poverty which founds on the premises of quantity equation of money. The quantity equation of money, in growth rates, postulates that a rise in the growth of money velocity is accompanied by a rise in the growth of real GDP provided that the money supply and general prices grow proportionately. This study offers an evidence of money velocity’s positive role on economic activities by conducting an empirical analysis of the data from different countries and also by simulating a dynamic stochastic general equilibrium (DSGE) model by introducing a velocity shock. It is claimed that the relatively dormant poor economies in the world need a stroke of rising money velocity to create jobs and lead them into prosperity. Some computational and prototype models are discussed to substantiate this claim. The results are intended to provide a baseline for further research. Various policy prescriptions, ranging from testing the approach by using randomized control trials to an in-depth diagnosis of money velocity in a micro level, have been forwarded to implement and observe the effects of this new approach.