Journal of Economic Perspectives: Vol. 26 No. 4 (Fall 2012)


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

Article Citation

Dimand, Robert W., and Rebeca Gomez Betancourt. 2012. "Retrospectives: Irving Fisher's Appreciation and Interest (1896) and the Fisher Relation." Journal of Economic Perspectives, 26(4): 185-96.

DOI: 10.1257/jep.26.4.185


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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Dimand, Robert W. (Brock U)
Gomez Betancourt, Rebeca (Lumiere U Lyon II)

JEL Classifications

B13: History of Economic Thought: Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Stockholm School)
B31: History of Economic Thought: Individuals
E31: Price Level; Inflation; Deflation
E43: Interest Rates: Determination, Term Structure, and Effects


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