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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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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.26.4.185
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    References listed on IDEAS

    as
    1. 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.
    2. N/A, 1964. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 28(1), pages 3-3, May.
    3. N/A, 1964. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 30(1), pages 3-3, November.
    4. N/A, 1964. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 29(1), pages 3-3, August.
    5. Robert W. Dimand, 2005. "Economists and "The Other"," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(3), pages 827-850, July.
    6. N/A, 1964. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 27(1), pages 3-3, February.
    7. 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.
    8. 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.
    9. Robert W. Dimand & John Geanakoplos, 2005. "Celebrating Irving Fisher," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(1), pages 3-18, January.
    10. Thomas M. Humphrey, 1983. "The early history of the real/nominal interest rate relationship," Economic Review, Federal Reserve Bank of Richmond, issue May, pages 2-10.
    11. Dimand, Robert W., 1998. "Fisher and Veblen: Two Paths for American Economics," Journal of the History of Economic Thought, Cambridge University Press, vol. 20(04), pages 449-465, December.
    Full references (including those not matched with items on IDEAS)

    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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