International Fisher Effect: Linking Interest Rates to Currency Movements

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International Fisher Effect: Linking Interest Rates to Currency Movements

Highlights Predicts currency value changes based on interest rate differentials. Assumes inflation impacts interest rates and exchange rates. Helps investors and businesses in forex risk management. The International Fisher Effect (IFE) is a fundamental economic theory that links interest rate differentials between two countries to future changes in their exchange rates. Named after economist Irving Fisher, the IFE suggests that the difference …