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

  • Robert W. Dimand
  • Rebeca Gomez Betancourt

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.

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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 26 (2012)
Issue (Month): 4 (Fall)
Pages: 185-96

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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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  1. William J. Crowder, 1997. "The Long-Run Fisher Relation in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1124-42, November.
  2. 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.
  3. Rebeca Gomez Betancourt, 2010. "E. W. Kemmerer's contribution to the quantity theory of money," Post-Print halshs-00458052, HAL.
  4. 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.
  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," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(1), pages 3-18, 01.
  7. Robert W. Dimand, 2005. "Economists and "The Other"," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(3), pages 827-850, 07.
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