The International Fisher Effect is also known as the assumption of Uncovered Interest Parity. The interest rate in a specific country is independent of monetary variables. The real value of country’s currency will rise over time because of the assumption that says countries with lower interest rates will have lower inflation rates. The real interest rate should be the same across the borders.  The integration of the capital market will determine the validity of generalized Fisher effect. The international fisher effect requires the capital in markets to be free to flow across borders and between countries. Currency traders have noticed that the currency flows is restricted in underdeveloped countries; such as Sub-Saharan Africa. Generally, the capital markets of the developed countries are integrated in nature.    Investors’ purpose is to obtain the highest rate of return on their deposits; therefore they usually move deposits from countries with lower nominal interest rates to those with higher nominal interest rates.  It is also possible that this practice will extend to borrowing in the country with the lower nominal interest rate to deposit the money in countries with higher nominal interest rate. This is called Carry Trade which will usually get higher returns to investors. Another reason for the increase in value of the currency of the country with higher nominal interest rate would be the Carry Trade since it is considered international money movement practice.    Currency traders also noticed that there are some implications for International Fisher Effect for foreign investors. The implications are similar for foreign investors who try to capitalize on relatively high U.S. interest rate.  In most of the cases, the foreign investors will be unfavorably effect by the effects of relatively high U.S inflation rate if they try to capitalize on the high U.S. interest rates.      References 1. http://finance.mapsofworld.com/finance-theory/international-fisher-effect.html2. http://www.absoluteastronomy.com/topics/International_fisher_effect3. http://books.google.com/books?id=DhXcjkxjLvoC&pg=RA1-PA247&lpg=RA1-PA247&dq=international+fisher+effect&source=bl&ots=zgReS6QMGh&sig=zmse9XvfifBhe37Xy90jb2YPVOI&hl=en&ei=6W1WSunIF4LasQP4xZ30AQ&sa=X&oi=book_result&ct=result&resnum=6