In the matter of October 23, 1999, the Economist reports that the interest rate per annum is 5.93% in the U.S. and 70.0% in Turkey. Why do you suppose the interest rate is so high in Turkey? Depend on the reported interest rates, how would you calculate the change of the exchange rate among the U.S. dollar and the Turkish lira?
A high Turkish interest rate has to reflect a high expected inflation in Turkey. According to international Fisher effect (IFE), we have following
E(e) = i$ - iLira
= 5.93% - 70.0% = -64.07%
Thus the Turkish lira is expected to depreciate against the U.S. dollar by about 64%.