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Fisher equation as shown by the fisher hypothesis, Lecture notes of Macroeconomics

University of StrathclydeMacroeconomics

the fisher equation explained in a way where you can understand it

Typology: Lecture notes

2018/2019

Uploaded on 04/07/2019

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Introduction Inflation
THE FISHER EFFECT
The Fisher effect (Irving Fisher) describes the relationship between
expected inflation and interest rates.
it=rt+⇡e
t+1
where rtis the real interest rate,
itis the nominal interest rate,
and ⇡e
t+1is the expected inflation rate.
When expected inflation rises, the nominal interest rate will rise.

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Introduction Inflation

THE FISHER EFFECT

The Fisher effect (Irving Fisher) describes the relationship between expected inflation and interest rates. it = rt + ⇡e t+ 1 where rt is the real interest rate, it is the nominal interest rate, and ⇡ te+ 1 is the expected inflation rate. When expected inflation rises, the nominal interest rate will rise.