GRIPS 政策研究センター Policy Research Center


2007/9/1 Report No:07-05

DEVOLUTION OF THE FISHER EQUATION: Rational Appreciation to Money Illusion

  • James R. Rhodes政策研究大学院大学
分野 経済学
言語 英語

In Appreciation and Interest Irving Fisher (1896) derived an equation connecting interest rates in any two standards of value. The original Fisher equation (OFE, 1896) was expressed in terms of the expected appreciation of money (the real return on money) whereas the ubiquitous conventional Fisher equation (CFE, 1930) uses expected inflation. Since the OFE is based on the value of money (1/P) it is not subject to standard criticisms of irrationality leveled against the CFE. Fisher’s puzzling substitution of lagged inflation for expected money appreciation in 1930 is resolved by taking into account his theory of “money illusion.” [JEL: E40, B00, B31]

キーワード Fisher equation, Fisher hypothesis, Fisher effect, money illusion, nominal interest rate, purchasing power of money, value of money.
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