INTERNATIONALFISHEREFFECTInternationalFinancialManagement2024/11/121DivisionofTheGroupMembers2024/11/122ContentsNamesDefinitionLiuYongjun,JinWenbo,DengyuwenTheoryapplicationYangBowen,CaoYi,LiChenCaseWangYin,JiBao,KaiQiSignificanceYuLijie,TangNingDefinitionFromFisherEffecttoInternationalFisherEffect2024/11/123PresentCurrencyFutureCurrencyNominalinterestrateButwhat?ActualinterestrateDefinitionFisherEffect:Nominalinterestrate=Actualinterestrate+InflationrateCombinePPPwithFisherEffect:ThenwecangettheInternationalFisherEffect:Or2024/11/1241+r=（1+ρ）（1+E(i)）St/So＝(1＋Pd)/(1＋Pf)＝(1＋id)/(1＋if)St/So＝(1＋id)/(1＋if)Δ＝（St－So）/So＝(id－if)/(1＋if)Application1.2024/11/125Interestrate

gohighexpectinginflationrategohighCurrencydevaluationApplication2.In2023Japan,primeinterestrate:0.5%,

loanrate:around1.5%Australia,depositrate:6.25%2024/11/126HugeCarrytradeCurrencyrevaluationMoreHotMoneyflowinCPIgohighBankadddepositrateCauseaviciouscircleDifferencebetweenIFE&RPInrateparity,evenintherealitytrade,thearbitratorcanhavetheobservedvalueofallthefourvariables（Ft，St，id，if）,howeverinIFE,theinvestorcanonlygetthreeofthem（E（St+1））,andtheforthvariableistheexpectingvaluecanonlybeknownaftertheinvestment.Intherealitytrade,IFEinvolveforeignerinvestmentincludeexchangerisk.However,theforeignerinvestmentRPinvolvedhasnoexchangerisk.2024/11/127Shortages1. Inshort-termtheactualdataisverydifferentfromthetheory.2. Manycurrencyhasforeignexchangeriskpremium,kindsofuncoveredarbitrageactivitiesdistortthemoneymarket.Soinmanysituationthechangeoftheexchangeratewillhigherthanthedifferenceoftwocountries’interestrate3. Assumetheactualinterestrateamongtheallcountriesisequalisnotsuitthereality.Actually,themoreIFEmakesense,them