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IFE Application to Asian Crisis

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Please help with the following problem.

Before the Asian crisis, many investors attempted to capitalize on the high interest rates prevailing in the Southeast Asian countries although the level of interest rates primarily reflected expectations of inflation. Explain why investors behaved in this manner.

Why does the IFE suggest that the Southeast Asian countries would not have attracted foreign investment before the Asian crisis despite the high interest rates prevailing in those countries?

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This posting helps with a question about IFE application to Asian Crisis. The solution applies the International Fisher effect to the Asian crisis. The explanation is given in 112 words.

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Problem: Before the Asian crisis, many investors attempted to capitalize on the high interest rates prevailing in the Southeast Asian countries although the level of interest rates primarily reflected expectations of inflation. Explain why investors behaved in this manner.

Why does the IFE suggest that the Southeast Asian ...

Purchase this Solution


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