Index of the Cycle of Money - The Case of Latvia

Abstract Research purpose. This paper has established the index of the cycle of money. The index shows the level of the appropriately structured economy. According to the theory of the cycle of money, it is examined if an amount of money is recycled in the economy a lot of times or this amount of money is lost from an economy to other economies or banks abroad, because of inadequate structure of the economy of the country, then the purpose of the paper is to show an application of the case cycle of money, here in the case of Latvia. Therefore, this work aims to clarify how the theory of the cycle of money works to a real case scenario, and in general, how the cycle of money applies to an economy. Moreover, the index of the cycle of money shows how an economy could counteract to an economic crisis and how well-structured it is. Design/Methodology/Approach. The methodology followed in this work is based on the mathematical application of the theory of the cycle of money. Then, the current results have as root the equations of this theory for the examination of the case of Latvia for the period from 2012 to 2017. Beyond the mathematical applications, the R.B.Q. model with the Q.E. method is applied to ensure the credibility of the results. Therefore, we have a real case scenario and a simulation case for the case of Latvia. Findings. The results of the index of the cycle of money to the case of Latvia are compared with the global average index of the cycle of money. The results show, as expected, that Latvia is above the average global value. Latvia’s findings show that it is a well-structured economy and can counteract an economic crisis. Originality/Value/Practical implications. The results are original and show for the first time the cycle of money of Latvia through the application of this theory. This research is the first application of the cycle of money in the case of index calculations. So, it is a completely new concept based on the theory of the cycle of money.