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 suggests that the difference between nominal interest rates in two countries is equal to the difference between their expected inflation rates. Therefore, if this holds true, real interest rates in all countries should be equal, as inflation rates would be the only determinant of nominal interest rate discrepancies. However, in reality, other factors such as risk and market conditions can influence nominal interest rates, and thus, real interest rates may not be equal across all countries.

If the International Fisher Effect Is Valid, Then Real Interest