Economist Irving Fisher is credited with the inflation expectations theory of interest rates, which proposes that the nominal risk free interest rate (i.e., developed economy government issued debt) consists of a real interest rate plus and an inflation expectation.
1 + r f nominal = (1 + r f real)(1 + E(I))
The International Fisher Relation connects the difference in nominal risk free interest rates between countries to their expected inflation rates.
(1+ r f X)/( 1+ r f Y) = ((1 + E(IX)/(1 + E(IY))
A flaw in the international Fisher relation is that the model does not take business cycle differences between economies into consideration.