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What is the fisher effect?

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NateFortesfb6666

Lvl 1
10y ago
Updated: 8/23/2022

The international fisher effect states that the interest rates in any one country will drive its inflation and hence devalue its currency against Another Country It is a combination of the Interest Rate Party Theory (IRPT) and Purchasing Power Parity Theory (PPPT). It is an economic theory that states the difference in the value of 2 currencies is approximately equal to the difference in the nominal rates of interest for that time Rational - higher interest rates causes higher inflation and hence depreciation of currency

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