What is the international Fisher effect?
Currency exchange rates
Stock prices
Commodity prices
Housing market
Answer
Currency exchange rates are determined by the international Fisher effect, which states that the expected inflation rate differential between two countries should be equal to the difference in their nominal interest rates. This relationship holds because investors seek to maintain the real value of their investments, so they will only invest in foreign assets if they expect to earn a higher real return than they would in their home country.
Irving Fisher Trivia: 31 Questions to Test Your Memory
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