Should Nominal Interest Rates Be Equal Across Countries? Why or Why

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Examlex · Accepted Answer

The Answer is The nominal interest rate can be defined as the sum (or more precisely the compounding) of the real interest rate and the expected inflation rate over the term of the interest rate. Although the international Fisher relation claims that real interest rates are equal across the world, we know that expected inflation can be very different from one country to another. Therefore, there is no reason why nominal interest rates should be equal across countries.

Should Nominal Interest Rates Be Equal Across Countries? Why or Why

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