The International Fisher effect stated that "if expected real interest rates are the same everywhere,then differences in the nominal interest rate must reflect differences in expected inflation rates."

Question

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The International Fisher effect is based on the idea that changes in exchange rates between two countries are dictated by the difference in their nominal interest rates, which in turn reflect the difference in their expected inflation rates. Therefore, if the real interest rates are equal across countries, the difference in nominal interest rates must be due to differing expected inflation rates.

The International Fisher Effect Stated That "If Expected Real Interest