ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -International Fisher Effect states that the future spot rate should move in an amount equal to, but in a different direction from, the difference in interest rates between two countries.

Detailed explanation-2: -IFE suggests a relationship between the interest rate differential of two countries and the percentage change in the spot exchange rate over time. IFE is based on nominal interest rate differentials, which are influenced by expected inflation.

Detailed explanation-3: -The international Fisher effect (IFE) states that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.

Detailed explanation-4: -IRP theory is a theory that suggests a strong relationship between interest rates and the movement of currency values. It suggests that future exchange rates will be dependent upon the differences in interest rate in two countries.

Detailed explanation-5: -Uncovered interest rate parity (UIP) theory states that the difference in interest rates between two countries will equal the relative change in currency foreign exchange rates over the same period.