Inflation, Interest Rate, And Exchange Rate: What is the Relationship?(Economics ARTICLES‪)‬

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.