The theory that real interest rates are equal across countries is called

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The theory that real interest rates are equal across countries is called the international Fisher effect, which states that the difference in nominal interest rates between two countries reflects the expected change in their respective currency values. This theory is closely related to the Fisher effect, which states that nominal interest rates include expected inflation, and the real interest rate is equal to the nominal interest rate minus expected inflation. Purchasing power parity (A) is a related theory that suggests exchange rates should adjust to equalize the price of identical goods in different countries. The unbiased forward rates condition (C) and uncovered interest parity (D) both relate to exchange rate expectations and interest rate differentials. Interest rate parity (E) is a general term that encompasses various theories and conditions that link interest rates and exchange rates.

The Theory That Real Interest Rates Are Equal Across Countries