IDEAS home Printed from https://ideas.repec.org/a/aea/jecper/v26y2012i4p185-96.html
   My bibliography  Save this article

Retrospectives: Irving Fisher's Appreciation and Interest (1896) and the Fisher Relation

Author

Listed:
  • Robert W. Dimand
  • Rebeca Gomez Betancourt

Abstract

Irving Fisher's monograph Appreciation and Interest (1896) proposed his famous equation showing expected inflation as the difference between nominal interest and real interest rates. In addition, he drew attention to insightful remarks and numerical examples scattered through the earlier literature, and he derived results ranging from the uncovered interest arbitrage parity condition between currencies to the expectations theory of the term structure of interest rates. As J. Bradford DeLong wrote in this journal (Winter 2000), "The story of 20th century macroeconomics begins with Irving Fisher" and specifically with Appreciation and Interest because "the transformation of the quantity theory of money into a tool for making quantitative analyses and predictions of the price level, inflation, and interest rates was the creation of Irving Fisher." I discuss the message of Appreciation and Interest, and assess how original he was.

Suggested Citation

  • Robert W. Dimand & Rebeca Gomez Betancourt, 2012. "Retrospectives: Irving Fisher's Appreciation and Interest (1896) and the Fisher Relation," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 185-196, Fall.
    • Handle: RePEc:aea:jecper:v:26:y:2012:i:4:p:185-96
    Note: DOI: 10.1257/jep.26.4.185
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.26.4.185
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fisher, Irving, 1907. "The Rate of Interest," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number fisher1907.
    2. N/A, 1964. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 29(1), pages 3-3, August.
    3. Robert W. Dimand, 2005. "Economists and the Shadow of “The Other” Before 1914," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(3), pages 827-850, July.
    4. N/A, 1964. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 27(1), pages 3-3, February.
    5. Robert W. Dimand, 1999. "Irving Fisher and the Fisher Relation: Setting the Record Straight," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 744-750, May.
    6. Robert W. Dimand & John Geanakoplos, 2005. "Celebrating Irving Fisher: The Legacy of a Great Economist," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(1), pages 3-18, January.
    7. Dimand, Robert W., 1998. "Fisher and Veblen: Two Paths for American Economics," Journal of the History of Economic Thought, Cambridge University Press, vol. 20(4), pages 449-465, December.
    8. William J. Crowder, 1997. "The Long-Run Fisher Relation in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1124-1142, November.
    9. N/A, 1964. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 28(1), pages 3-3, May.
    10. N/A, 1964. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 30(1), pages 3-3, November.
    11. Rebeca Gomez Betancourt, 2010. "E. W. Kemmerer's contribution to the quantity theory of money," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 17(1), pages 115-140.
    12. Thomas M. Humphrey, 1983. "The early history of the real/nominal interest rate relationship," Economic Review, Federal Reserve Bank of Richmond, vol. 69(May), pages 2-10.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hasse, Jean-Baptiste & Lajaunie, Quentin, 2022. "Does the yield curve signal recessions? New evidence from an international panel data analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 9-22.
    2. Max Gillman, 2021. "Macroeconomic Trends among Visegrád Countries, EU Balkans, and the U.S., 1991-2021," Central European Business Review, Prague University of Economics and Business, vol. 2021(2), pages 1-20.
    3. Sylvie Rivot, 2020. "Information and Expectations in Policy-Making: Friedman's Changing Approaches to Macroeconomic Dynamics," GREDEG Working Papers 2020-39, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    4. Cruz-e-Silva, Victor & Almeida, Felipe, 2024. "Correa Moylan Walsh beyond index numbers: from the “battle of the standards” to the science of money," SocArXiv 4yxbp, Center for Open Science.
    5. Jean-Baptiste Hasse & Quentin Lajaunie, 2020. "Does the Yield Curve Signal Recessions? New Evidence from an International Panel Data Analysis," AMSE Working Papers 2013, Aix-Marseille School of Economics, France.
    6. BRILLANT, Lucy, 2024. "The origins of yield curve theory: Irving Fisher and John Maynard Keynes," SocArXiv 9hf8z, Center for Open Science.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Spurlock, Hughes H., 1966. "The Competitive Position of U.S. Farm Products in the Japanese Market," Foreign Agricultural Economic Report (FAER) 144450, United States Department of Agriculture, Economic Research Service.
    2. Regier, Donald W. & Goolsby, O. Halbert, 1970. "Growth in World Demand for Feed Grains: Related to Meat and Livestock Products and Human Consumption of Grain, 1980," Foreign Agricultural Economic Report (FAER) 145298, United States Department of Agriculture, Economic Research Service.
    3. Klausner, Kim & Landman, Anne & Taketa, Rachel, 2014. "“Create a Bigger Monster:” Tobacco industry actions to neutralize three landmark Surgeon Generals’ Reports," University of California at San Francisco, Center for Tobacco Control Research and Education qt71b8s1c9, Center for Tobacco Control Research and Education, UC San Francisco.
    4. James R. Rhodes, 2006. "DEVOLUTION OF THE FISHER EQUATION: Rational Appreciation to Money Illusion," GRIPS Discussion Papers 08-04, National Graduate Institute for Policy Studies, revised Jun 2008.
    5. Lothian, James R. & Pownall, Rachel A.J. & Koedijk, Kees G., 2013. "I discovered the peso problem: Irving Fisher and the UIP puzzle," Journal of International Money and Finance, Elsevier, vol. 38(C), pages 5-17.
    6. Henrik Egbert & Teodor Sedlarski, 2017. "Fundamentals of modern economy: Irving Fisher and intertemporal choice theory," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 132-143.
    7. Campbell-Pownall, R.A.J. & Koedijk, C.G. & Lothian, J.R. & Mahieu, R.J., 2007. "Irving Fisher and the UIP Puzzle: Meeting the Expectations a Century Later," ERIM Report Series Research in Management ERS-2007-088-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    8. Robert W. Dimand, 2012. "The Roots of the Present are in the Past: The Relation of Postwar Developments in Macroeconomics to Interwar Business Cycle and Monetary Theory," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 5, Edward Elgar Publishing.
    9. Gylfason, Thorvaldur & Tómasson, Helgi & Zoega, Gylfi, 2016. "Around the world with Irving Fisher," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 232-243.
    10. Atkins, Frank J. & Coe, Patrick J., 2002. "An ARDL bounds test of the long-run Fisher effect in the United States and Canada," Journal of Macroeconomics, Elsevier, vol. 24(2), pages 255-266, June.
    11. Robert W. Dimand & John Geanakoplos, 2005. "Celebrating Irving Fisher: The Legacy of a Great Economist," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(1), pages 3-18, January.
    12. Robert W. Dimand, 2005. "Economists and the Shadow of “The Other” Before 1914," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(3), pages 827-850, July.
    13. Peter N. Ireland, 1996. "Long-term interest rates and inflation: a Fisherian approach," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 21-36.
    14. Michael D. Bordo & Hugh Rockoff, 2011. "The Influence of Irving Fisher on Milton Friedman's Monetary Economics," NBER Working Papers 17267, National Bureau of Economic Research, Inc.
    15. Bryer, Rob, 2013. "Americanism and financial accounting theory – Part 3: Adam Smith, the rise and fall of socialism, and Irving Fisher's theory of accounting," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 24(7), pages 572-615.
    16. Dario Cziráky & Max Gillman, 2006. "Money Demand in an EU Accession Country: A VECM Study of Croatia," Bulletin of Economic Research, Wiley Blackwell, vol. 58(2), pages 105-127, April.
    17. Óscar Bajo Rubio & Carmen Díaz Roldán & Vicente Esteve, 2004. "Is the Fisher Effect Nonlinear? Some Evidence for Spain, 1963-2002," Economic Working Papers at Centro de Estudios Andaluces E2004/05, Centro de Estudios Andaluces.
    18. Christian Johnson & George G Kaufman, 2007. "Un banco, con cualquier otro nombre…," Boletín, CEMLA, vol. 0(4), pages 185-199, Octubre-d.
    19. Daniel L. Thornton, 2007. "The daily and policy-relevant liquidity effects," Working Papers 2007-001, Federal Reserve Bank of St. Louis.
    20. Barbara Rossi, 2013. "Exchange Rate Predictability," Journal of Economic Literature, American Economic Association, vol. 51(4), pages 1063-1119, December.

    More about this item

    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:26:y:2012:i:4:p:185-96. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.