The international Fisher effect (IFE) suggests that the currencies with relatively high interest rates will appreciate because those high rates will attract investment and increase the demand for that currency.

Question

Quizplus · Accepted Answer

The International Fisher Effect suggests that currencies with relatively high interest rates will actually depreciate, not appreciate, because the higher interest rates are expected to be offset by a future decrease in the value of the currency.

The International Fisher Effect (IFE) Suggests That the Currencies with Relatively