International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

A Test of the International Fisher Effect in Selected Asian Countries
Maurice K. Shalishali

In a simplified statistical test of the IFE (International Fisher Effect), a regression analysis was applied to historical exchange rates and interest differentials data for eight selected Asian countries namely: China, India, Japan, South Korea, Malaysia, Thailand, Vietnam, and Indonesia. Each of these countries was interchangeably used as the home country, and foreign country to track the trail of the effect. While caution must be exercised in applying and assessing the theory, the IFE model may not be realistic to put into practice in daily currency transactions, but its value lies in its ability to illustrate the expected relationship between interest rates, inflation and exchange rates. This information is helpful in appraising the price competitiveness of foreign imports and in exploring export opportunities for countries.

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