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What is Understanding the International Fisher Effect about?

The International Fisher Effect (IFE) is an economic theory that posits a relationship between interest rates and exchange rates, suggesting that countries with higher interest rates will see their currencies depreciate, while those with lower rates will experience appreciation. This occurs due to the impact of inflation on currency value, influencing import and export prices in international trade. Although IFE is useful for long-term exchange rate forecasting, it may not hold true in the short run due to

Author
sakshimadhukar1122
Language
EN