Assume that the euro and Chile nominal interest rates are equal. Then, the euro nominal interest rate decreases while the Chilean nominal interest rate remains stable. According to the international Fisher effect, this implies expectations of ____ than before, and that the Chilean peso should ____ against the euro.

Question

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According to the international Fisher effect, a decrease in the euro nominal interest rate suggests expectations of lower euro inflation. Consequently, the Chilean peso should depreciate against the euro.

Assume That the Euro and Chile Nominal Interest Rates Are