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The international Fisher effect can be used to predict the real interest rate.It should be true as per my understanding , I understand it is used to calculate actual interest rate , but isnt real rate a part of the formula ?
It is a trick question.
The Fisher formula allows us to calculate the real interest rate from the actual interest rate (or the other way round).
However the International Fisher Effect is used to forecast future exchange rate based on the inflation rates in the two countries, which in theory also change with the interest rates in the two countries. It is not used to predict interest rates.
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