Interest Rates and Asset Values : A Case Study in Closed Markets

This book presents the first comprehensive empirical analysis of the causal relationship between interest rates and asset values in closed markets, using the unique example of the UK retail pharmacy sector, a market closed by regulation for over three decades.

In the complex world of corporate strategy and market dynamics, very few questions are as fundamental as understanding what drives the value of business assets. This book presents the first comprehensive empirical analysis of the causal relationship between interest rates and asset values in closed markets, using the unique example of the UK retail pharmacy sector, a market closed by regulation for over three decades. It uncovers a near-perfect inverse relationship between interest rates and asset values that has persisted across multiple economic cycles, pandemics, changes of government and fundamental changes in both healthcare policy and monetary policy and offers robust proof of an economic principle long theorised but never previously demonstrated so clearly in practice. The book bridges macroeconomic theory, Keynes, Monetarism, Fisher Effect, business strategy and applied policy and offers insights relevant to economists, policymakers, business professionals and anyone interested in asset valuation in regulated markets. Original contributions include the empirical proof of the interest rate – asset value link in a genuinely closed market and the introduction of the concept of “quasi-real assets”, a term that has rarely been used. This book turns it into a term which can be more usefully, and regularly, applied in economic debate. While the book presents a UK case study, the principles and findings are applicable to any regulated or closed market worldwide and are particularly relevant to sectors like taxis, medical practices, broadcasting, etc. The book will appeal to researchers, scholars and advanced students in economics, business, finance and public policy, as well as policymakers, regulators, professional valuers and consultants.