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

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  • 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
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    References listed on IDEAS

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    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.
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    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," Journal of the History of Economic Thought, Cambridge University Press, vol. 46(1), pages 69-91, March.
    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.

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    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

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