The ________ is not a good predictor of short-run changes in spot exchange rates.
A)Fisher Effect
B)inflation effect
C)bandwagon effect
D)nominal interest rate differentials effect

Question

Quizplus · Accepted Answer

The Fisher Effect suggests that changes in a country's nominal interest rates can lead to changes in its expected inflation rate, which in turn can affect its exchange rate. However, it is not a reliable predictor of short-term changes in spot exchange rates. Other factors such as market sentiment and economic news can have a greater impact on short-term exchange rate movements.

The ________ Is Not a Good Predictor of Short-Run Changes