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Suppose that the real interest rate in Japan and the U.S. is 1.50%. Furthermore, assume that the nominal (1year) interest rate in Japan is 11.50%
Suppose that the real interest rate in Japan and the U.S. is 1.50%. Furthermore, assume that the nominal (1year) interest rate in Japan is 11.50% while the nominal interest rate over the same time period in the United States is 7.50%. According to the international Fisher effect theory, the expected inflation rate in Japan is % while the expected inflation rate in the U.S. is % .
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