Fisher's Theory of Interest Rates and the Notion of Real: A Critique
By providing five different criticisms of the notion of real rate, the paper argues that this concept, as Fisher defined it or as a definition, is not relevant to economic analysis. Following Keynes and other post-Keynesians, the article shows that the notion of real rate is microeconomically and macroeconomically unfounded. Adjusting interest rates for inflation does not protect the purchasing power of wealth, and it is impossible to do so at the macroeconomic level. In addition, an empirical interpretation of the break in the correlation between interest rates and inflation since 1953 is provided.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Orphanides, Athanasios, 2004.
"Monetary Policy Rules, Macroeconomic Stability, and Inflation: A View from the Trenches,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 36(2), pages 151-75, April.
- Athanasios Orphanides, 2001. "Monetary policy rules, macroeconomic stability and inflation: a view from the trenches," Finance and Economics Discussion Series 2001-62, Board of Governors of the Federal Reserve System (U.S.).
- Orphanides, Athanasios, 2001. "Monetary policy rules, macroeconomic stability and inflation: a view from the trenches," Working Paper Series 0115, European Central Bank.
- Milton Friedman, 1971.
"A Theoretical Framework for Monetary Analysis,"
National Bureau of Economic Research, Inc, number frie71-1, October.
- Frank Hahn, 1985. "Money and Inflation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262580624, June.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998.
"Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory,"
CEPR Discussion Papers
1908, C.E.P.R. Discussion Papers.
- Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 147-180, February.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
- Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
- Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
- Noor Ghazali & Shamshubariah Ramlee, 2003. "A long memory test of the long-run Fisher effect in the G7 countries," Applied Financial Economics, Taylor & Francis Journals, vol. 13(10), pages 763-769.
- Cottrell, Allin, 1994. "Keynes and the Keynesians on the Fisher Effect," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(4), pages 416-33, November.
- Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
- Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-82, June.
- Kregel, J A, 1985. "Hamlet without the Prince: Cambridge Macroeconomics without Money," American Economic Review, American Economic Association, vol. 75(2), pages 133-39, May.
- L. R. Wray, 1990. "Money and Credit in Capitalist Economies," Books, Edward Elgar, number 474, March.
- Davidson, Paul, 1972. "A Keynesian View of Friedman's Theoretical Framework for Monetary Analysis," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 864-82, Sept.-Oct.
- Carmichael, Jeffrey & Stebbing, Peter W, 1983. "Fisher's Paradox and the Theory of Interest," American Economic Review, American Economic Association, vol. 73(4), pages 619-30, September.
When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_483. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Celeste Edwards)
If references are entirely missing, you can add them using this form.