Question $50$

If the bond yield in the U$.$S$.$ is higher $($e$.$g$.,$ one$-$year maturity at $3\backslash \%)$ than Japan's $($e$.$g$.,$ one$-$year maturity at $\backslash (0\mathrm{.}2\backslash \%\backslash )),$ investors are likely to favor U$.$S$.$ investments. This would suggest that the U$.$S$.$ dollar should appreciate against the Japane$$e Yen. However, the International Fisher Effect $($IFE$)$ model indicates that the US dollar would depreciate against Yen. Why?

There is no logic in the International Fisher Effect model. So$,$ nobody can explains whey our common sense conflicts with IFE.

According to the International Fisher Effect $($IFE$)$