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Which of the following statements on the Fisher effect and the international Fisher effect is NOT correct? The nominal interest rate differential between two countries
Which of the following statements on the Fisher effect and the international Fisher effect is NOT correct? The nominal interest rate differential between two countries should be roughly equal to their expected inflation rate differential if the real interest rates converge. In well integrated capital markets, the real interest rates will converge. An increase in the expected inflation rate in a country will cause a proportionate increase in the nominal interest rate in the country. The Fisher effect predicts that a country with low inflation should have a high nominal interest rate
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