Just wondering if anyone could shed some light on the following:
Information given is
US rfr : 7% Eurozone rfr : 9.08% Jap rfr: 3.88%
Anticipated and historical inflation- US : 3% Jap 0% Eurozone 5%
The question asks if the Japanese and Eurozone inflation rates are correct assuming the US inflation of 3% and Fisher holds
To my mind for the Euro the calculation should be (1+US infl)/(1 + EU infl)=(1+ US int)/(1+EU int)
Which is (1.03)/(1.05)=(1.07)/(1.0908). Obviously the two sides balance indicating Fisher holds. Or so i thought
However, the answer states that neither Jap or Euro inflation rates whereas my calculations indicate they are both correct.
Can anyone tell me where ive gone wrong please?
Thanks
SL