If the International Fisher effect is valid, then real interest rates in all countries should be equal.

Question

Quizplus · Accepted Answer

The International Fisher effect (IFE) states that the difference in nominal interest rates between two countries should be equal to the difference in their expected inflation rates. Therefore, if the IFE is valid, real interest rates in all countries should be equal, as real interest rates are calculated by subtracting inflation from nominal interest rates.

If the International Fisher Effect Is Valid, Then Real Interest