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For example if the values of big companies in a country decrease, will the value of that country's currency measurably decrease?

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  • $\begingroup$ NO. Company valuation are comprise of tangible and intangible value, and it can never be directly convert to money terms. So it doesn't change the circulation money pool and not relevant to money supplies. $\endgroup$ – mootmoot Dec 6 '16 at 14:17
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A company valuation is merely in paper. It is similar to economist eating shit jokes. When the stock price of a big company drops, it "suppose to" hurts the shareholder who bought it on high.

When I say "suppose", because intervention does happens to "too big to fail" company. In worst case, government hold too much "interest" in big company that might issue bonds(AKA print money) to bails out the entity, as what happens to Asian financial crisis, and USA subprime loan financial crash.


IMHO, details real world example falls under TL;DR; category. There is countless global example.

A large company stock can be jack up by speculation. Say a company issues 10 millions stock with $1 face values. If a willing buyer trade 100 stocks with $1.50, and subsequent buyer keep buying 100 stocks and jack it to $50, it doesn't mean the company "values" sudden shoot up from $1 x 10 millions = $10 millions to $50 x 10 millions($500 millions). This WILL NOT create extra $490 millions to the economy, nor to the money supplies.

Without government money supplies and cheap loan rates, it is impossible to create such speculation. In addition, without increase money supplies, not hot money flow into a country, foreign exchange will always stay in a stabil level.

Example of high stock values and insane inflation

  • Zimbabwe stock market compare stock value.

Examples of bubbles crash and NO bailout made, no apparent inflation

  • Dot Com bubbles.
  • Enron, Worldcomm scandal.

Example of bubbles crash. Country bail out cause higher inflation

  • Asia pre 2007 economy crisis stock value

Example of crash and bail out inflation flow to other country.

  • USA QE. Speculator borrow cheap money and speculate outside US. Hot money cause many Asian country company stock shoot up without fundamental.
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  • $\begingroup$ This does not address any of the channels through which changes in the value of a company could influence the exchange rate of the currency. Let's first consider the facts: the nominal exchange rate fluctuates around the real exchange rate. Given this fact, can you edit your answer to propose a chain of events that starts with a change in the valuation of a company and ends in either nominal or real exchange rates fluctuating? $\endgroup$ – Hessian Dec 6 '16 at 20:41

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