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.

The aim of this paper is to analyze the state of the quantity theory in the United States prior to the publication of Irving Fisher’s The Purchasing Power of Money in 1911. We start by presenting the participants in the monetary debate. Next, we analyze the controversies regarding prices, purchasing power of money, and credit, prior to the Gold Standard Act of 1900, in particular the opposing views of Francis Amasa Walker and James Laurence Laughlin. We then go on to study of the restatement of the quantity theory at the beginning of the twentieth century, through the introduction of credit in the analysis and the statistical tests of the exchange equations. Finally, we study the problems and management of the gold standard, focusing on the elasticity of money supply, the characteristics of the gold exchange standard, and the contrast between the fixed price of gold and its fluctuating purchasing power. We show the improvement of the quantity theory and the new issues that emerged from the rich and original American monetary debate, prior to the publication in 1911 of Fisher’s book.

International audienceThis paper aims at suggesting a new interpretation of Edwin Walter Kemmerer's quantity theory of money as it appears in his Money and Credit Instruments in Their Relation to General Prices (1903, PhD thesis; and 1907, first edition of the book). In that work, he proposes an equation to determine the price level as the ratio of its monetary and real determinants. The paper addresses Kemmerer's key question of how money and credit are related to general prices. Two directions are investigated. Firstly, I explain Kemmerer's quantity theory by means of his exchange equation and how his interpretation may have influenced Fisher's economic theory. Secondly, I consider his test of the quantity theory on the US economy and I show the empirical validity of his theory. It is argued here that both elements give a key contribution to finding a new interpretation of the deepest meaning of Kemmerer's approach to quantity theory

In 1911, Fisher published The Purchasing Power of Money. In chapter 13 of the first edition and in an appendix in the second section of 1913, he introduced a rule to maintain the stability of the level of prices, known as the "compensated dollar". According to this rule, the legal definition of money is changed. (...