IFE. Theory that the currency of a nation with a comparatively higher interest rate will depreciate in value in comparison to the currency of a nation with a comparatively lower interest rate. It further implies that the extent of depreciation will be equal to the difference in interest rates in those two nations. It is based on the observation that the level of real interest rate in an economy is closely linked to the level of local inflation rate and is independent of a government's monetary policies. Thus, in general, the higher the inflation rate, the lower the value of currency. Named after its proposer, the U.S. economist Irving Fisher (1867-1947).
Related information about International Fisher Effect:
- International Fisher effect - Wikipedia, the free encyclopedia
The international Fisher effect (sometimes referred to as Fisher's open hypothesis ) is a hypothesis in international finance that suggests differences in nominal ...
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Definition of 'International Fisher Effect - IFE'. An economic theory that states that an expected change in the current exchange rate between any two currencies ...
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Aug 11, 2010 ... The Fisher models have the ability to illustrate the expected relationship between interest rates, inflation and exchange rates.
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States that the interest rate differential between two countries should be an unbiased predictor of the future change in the spot rate.
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Mar 8, 2009 ... The International Fisher effect is a hypothesis in international finance that says that the difference in the nominal interest rates between two ...
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Definition of International Fisher Effect: IFE. Theory that the currency of a nation with a comparatively higher interest rate will depreciate in value in comparison to ...
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Question. • According to the International Fisher Effect it will be a tendency for countries with ... International Fisher Effect holds or not holds for those time frames.
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Abstract: The relationship between the nominal interest rates and the expected inflation is of crucial importance in financial markets. The Fisher effect postulated ...