Given a Home Country and a Foreign Country, the International

question 9

Multiple Choice

Given a home country and a foreign country, the international Fisher effect (IFE) suggests that:

• A) the nominal interest rates of both countries are the same.
• B) the inflation rates of both countries are the same.
• C) the exchange rates of both countries will move in a similar direction against other currencies.
• D) none of the above

---

Definitions:

Time Series

A sequence of data points collected or recorded at successive points in time, typically with equal intervals between them.

Seasonal Index

A factor used in time series analysis that adjusts for the seasonality of data, reflecting typical fluctuations that occur at specific times of the year.

Deseasonalized

The process of removing seasonal effects from a time series in order to identify underlying trends.

Linear Model

A statistical model that assumes a linear relationship between the input variables (independent) and the single output variable (dependent).