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From 1982 to 1988, a number of countries (e.g., Pakistan, Hungary, Venezuela) had a small or...

From 1982 to 1988, a number of countries (e.g., Pakistan, Hungary, Venezuela) had a small or negative interest rate differential and a large average annual depreciation against the dollar. How would you explain these data? Can you reconcile these data with the international Fisher effect?

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It is because these nations have had genuinely high amount of inflation rate joined with controls that held their interest rates beneath those who are successful in the free market. The high amount of average annual depreciation can be clarified by their quick inflation, though the nonappearance of the International Fisher impact is because of the interest rate controls.

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