国际费雪效应解说

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Shortages
1. In short-term the actual data is very different from the theory.
2. Many currency has foreign exchange risk premium, kinds of uncovered arbitrage activities distort the money market. So in many situation the change of the exchange rate will higher than the difference of two countries’ interest rate
INTERNATIONAL FISHER EFFECT
International Financial Management
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Division of The Group Members
Contents Definition Theory application Case Significance
Names Liu Yongjun, Jin Wenbo, Deng yuwen Yang Bowen, Cao Yi, Li Chen Wang Yin, Ji Bao, Kai Qi Yu Lijie, Tang Ning
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Definition
From Fisher Effect to International Fisher Effect
Combine PPP with Fisher Effect:
St/So＝(1＋Pd)/(1＋Pf)＝(1＋id)/(1＋if)
Then we can get the International Fisher Effect:
Or
St/So＝(1＋id)/(1＋if)
Δ＝（St－So）/So＝(id－if)/(1＋if)
go high add
Baidu Nhomakorabea
revaluation flow in
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Difference between IFE & RP
In rate parity, even in the reality trade, the arbitrator can have the observed value of all the four variables （Ft，St，id，if）, however in IFE, the investor can only get three of them（E（St+1））, and the forth variable is the expecting value can only be known after the investment.
Nominal interest rate
But what?
Actual interest rate
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Definition
Fisher Effect:
Nominal interest rate = Actual interest rate + Inflation
rate
1+r=（1+ρ）（1+E(i)）
In the reality trade, IFE involve foreigner investment include exchange risk. However, the foreigner investment RP involved has no exchange risk.
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Application
1.
go high
go high devaluation
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Application
2.
In 2007
Japan, prime interest rate:0.5%,
loan rate :around 1.5%
Australia, deposit rate :6.25%
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Thank you for your attention
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3. Assume the actual interest rate among the all countries is equal is not suit the reality. Actually, the more IFE make sense, the more unifying commodity market and financial market is.