International Fisher Effect by ANDRES MARCELO GONZALEZ ALVAREZ https://padlet.com/al02912922/35fpryk7tb9xcvrg implications of the changes in interest rates on the IFE en-us 2023-03-17 22:16:24 UTC 2025-11-02 05:29:21 UTC hello@padlet.com a. What implications would the IFE have on imports and exports? Should the domestic currency appreciate or depreciate? al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521391522 If the IFE holds, then a country with a higher nominal interest rate should experience a depreciation of its currency, making its exports more competitive in foreign markets by making them relatively cheaper. At the same time, the same country's imports should become more expensive due to the weaker currency.

]]> 2023-03-17 22:34:11 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521391522 Case 1. Mexico's inflation and interest rate are higher compared to Colombia al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521394760 Mexico should experience a depreciation of its currency, as well, this would imply a decreased demand of imports. On the other hand Colombia, would see an increase in the demand for imports, as consumers and businesses may find imported goods more attractive due to their relatively lower cost, The implication for trade between the two countries is that Mexican exporters may find it more difficult to compete with their Colombian counterparts, as their goods will be relatively more expensive in the Colombian market.]]> 2023-03-17 22:43:51 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521394760 Case 2. Mexico's inflation and interest rate are lower compared to Chile al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521394921 In this case investors should seek higher returns on their investments and therefore invest in the country with higher nominal interest rates, which in this case is Chile. The increase in the demand of chilean pesos would appreciate their currency, resulting in a decrease in the relative price of Mexican goods and an increase in the relative price of Chilean goods, making Chilean exports relatively more expensive and Mexican exports relatively cheaper.]]> 2023-03-17 22:44:19 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521394921 Case 3. Mexico's inflation and interest rate are similar compared to Argentina al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521398968 In this case if both countries have similar nominal interest rates, investors may not have a strong incentive to shift their funds from one country to another based solely on interest rate differentials, however the inflation expectations can be a factor in currency movements.
If investors perceive that one country has a higher risk of inflation than the other, they may demand a higher return to compensate for that risk, which could lead to currency movements.]]> 2023-03-17 22:57:16 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521398968 What is the International Fisher Effect ? al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521402186 The basic idea of (IFE) is that if the nominal interest rate in one country is higher than in another country, the currency of the country with the higher interest rate should depreciate relative to the currency of the country with the lower interest rate.]]> 2023-03-17 23:07:36 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521402186 How does the International Fisher Effect works? al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521402676 In summary, the IFE provides a useful theoretical framework for understanding the relationship between interest rates and exchange rates, it should be viewed as a general guideline rather than a precise predictor of currency movements.]]> 2023-03-17 23:09:02 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521402676 al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521403163 2023-03-17 23:10:45 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521403163 al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521403504 2023-03-17 23:11:58 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521403504 al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521403966 2023-03-17 23:13:23 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521403966 al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521404285 2023-03-17 23:14:28 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521404285 al02912922 https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521404676 2023-03-17 23:15:43 UTC https://padlet.com/al02912922/35fpryk7tb9xcvrg/wish/2521404676