Liquidity and the value of a business Lately, corporate houses have undertaken a rather flawed approach to valuing their business – looking at the stock price and using it as a reference points. As indicated by the subprime mortgage crisis which first engulfed the US and later the rest of the world, this is not the best approach.
Often owners of a private business will look at the stock prices of similar companies that are traded on an exchange and use those as a reference point to value their own businesses. For example, the... Read More
With open financial markets, we cannot have our cake and eat it, too. The relationship between monetary policy, financial openness, and the exchange rate is a trilemma in which we can only control two of the three variables.
Once two sides of a triangle are drawn, there is no uncertainty about the third. Similarly, the relationship between monetary policy, financial openness (constraints to foreign trade), and the exchang... Read More