The _____________ states that for any two countries,the spot exchange rate should change in an equal amount but in the opposite direction to the difference in the nominal interest rates between the two countries.

Question

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The International Fisher Effect states that the spot exchange rate should change by the same amount but in the opposite direction to the difference in the nominal interest rates between two countries. This is based on the assumption that capital flows freely between countries and market participants have rational expectations. The other options (Worldwide James Effect, Universal Phillips Effect, Global Miller Effect, and Law of One Price Effect) do not relate to the relationship between interest rates and exchange rates.

The _____________ States That for Any Two Countries,the Spot Exchange