Implications of the International Fisher Effect
The international Fisher effect (IFE) theory suggests that currencies with high interest rates will have high expected inflation (due to the Fisher effect) and the relatively high inflation will cause the currencies to depreciate (due to the PPP effect).
Implications of the IFE for Foreign Investors
The implications are similar for foreign investors who attempt to capitalize on relatively high interest rates in Thailand. The foreign investors will be adversely affected by the effects of a relatively high inflation rate in Thailand if they try to capitalize on the high interest rates in Thailand. Advocates of the IFE would suggest that on average, MNCs and investors that attempt to invest in interest-bearing securities with high interest rates would not benefit because the return in any period would equal the return they could earn domestically