Inflation, interest rate, and exchange rate: what is the relationship?
Notice bibliographique
Résumé
ABSTRACT A test of IFE (International Fisher Effect) theory was conducted for eight selected industrialized countries namely: Canada, France, Germany, Japan, The Netherlands, Sweden, Switzerland, and the United Kingdom. Each of these countries was used interchangeably as the home country, and foreign country to investigate the direction of the effect. Applying regression analysis to historical exchange rates and interest differentials was developed in a simplified statistical test of IFE. While caution must be exercised in applying and interpreting the theory, this information is useful in international business, export opportunities and price competitiveness of foreign imports. INTRODUCTION The International Fisher Effect (IFE) theory is an important concept in the fields of economics and finance that links interest rates, inflation and exchange rates. Similar to the Purchasing Power Parity (PPP) theory, IFE attributes changes in exchange rate to interest rate differentials, rather than inflation rate differentials among countries. The two theories are closely related because of high correlation between interest and inflation rates. The IFE theory suggests that currency of any country with a relatively higher interest rate will depreciate because high nominal interest rates reflect expected inflation. Assuming that the real rate of return is the same across countries, differences in interest rates between countries may be attributed to differences in expected inflation rates. One of the problems affecting consumers and the world economy is exchange rates fluctuations and interest rates disparities. Among others, exchange rates fluctuations can create inefficiency and distort world prices. Moreover, the long term profitability of investment, export opportunities and price competitiveness imports are all impacted by long-term movements in exchange rates, hence international investors/companies usually have to pay very close attention to countries' inflation. International businesses engaging in foreign exchange transactions on daily basis could benefit by knowing some short-term foreign exchange movements. LITERATURE REVIEW This theory is very attractive because it focuses on the interest-exchange rates relationship. Does the interest rate differential actually help predict future currency movement? Available evidence is mixed as in the case of PPP theory. In the long-run, a relationship between interest rate differentials and subsequent changes in spot exchange rate seems to exist but with considerable deviations in the short run (Hill, 1997). The international Fisher effect is known not to be a good predictor of short-run changes in spot exchange rates (Cumby & Obstfeld, 1981). Thomas (1985) conducted a test of the IFE theory by examining results of purchasing future contracts of currencies with higher interest rate that contained discounts (relative to the spot rate) and selling futures on currencies with low interest rate that contained premiums. Contrary to the IFE theory the study found that 57 percent of the transactions created by this strategy were profitable. The average gain was higher than the average loss. If the IFE theory holds, the high interest rate currencies should depreciate while the low interest rate currencies should appreciate, therefore yielding insignificant profits by the transactions. A study by Madura and Nosari (1984) simulated a speculative strategy by borrowing currency with the lowest quoted interest rate and invested in the currency with the highest interest rate. After the loan repayment at the end of the investment period, it was found that the difference between return on the investment and the cost of borrowing (spread) was usually positive. This is in contrary to the IFE theory. In a different but related study, Cheung et al. (1995) found more positive evidence for the support of the PPP hypothesis. …
Récupéré en direct depuis OpenAlex et désinversé. Les résumés ne sont pas conservés dans cette base de données : les index inversés représentent 8,6 Go des 9,3 Go de texte de la base, et le serveur dispose de 13 Go libres.
Comment cette classification a été obtenuedéplier
Prédiction machine sur la base complète
Imitation des enseignantsNi prévalence calibrée, ni vérité terrain. Validation humaine à venir. Le volet Gemma est une étiquette directe du modèle pour chaque travail de la base, lue sur la notice réduite au titre. Le volet Codex est un classifieur appris des 10 348 étiquettes directes de Codex et calibré sur les taux pondérés de l'échantillon; les champs sans appui suffisant ne portent aucun appel Codex. Le mode candidate est l'union des deux volets; le consensus est leur intersection. Ces sorties portent le statut machine_predicted_unvalidated et ne sont pas des étiquettes humaines.
Scores du classifieur distillé par catégorie (deux têtes)
| Catégorie | Codex | Gemma |
|---|---|---|
| Métarecherche | 0,006 | 0,035 |
| Méta-épidémiologie (sens strict) | 0,000 | 0,000 |
| Méta-épidémiologie (sens large) | 0,001 | 0,001 |
| Bibliométrie | 0,002 | 0,003 |
| Études des sciences et des technologies | 0,000 | 0,001 |
| Communication savante | 0,002 | 0,002 |
| Science ouverte | 0,000 | 0,001 |
| Intégrité de la recherche | 0,001 | 0,001 |
| Charge utile insuffisante (le modèle a refusé de juger) | 0,006 | 0,001 |
Scores machine (provisoires)
Les deux têtes enseignantes du modèle étudiant, lues sur ce travail. Un score ordonne la base pour la relecture; il n'affirme jamais une catégorie, et le statut de validation accompagne chaque rangée tel quel.
Scores de référence d'un modèle non mature (critères de maturité non atteints, 7 itérations). Un score ordonne; il n'affirme jamais une catégorie.
score_only:v0-immature-baseline · tel quel depuis la passe de notation : score_only signifie que le nombre peut ordonner les travaux, et qu'aucune étiquette de catégorie n'en découleClassification
machine, non validéePrédiction automatique; un appel candidat d’une seule source (Gemma direct ou Codex distillé), pas un consensus.
Le détail, modèle par modèle et score par score, se trouve en fin de page sous « Comment cette classification a été obtenue ».