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Fisher hypothesis - Definition and Overview |
| Related Words: Assertion, Assumption, Axiom, Basis, Conjecture, Data, Foundation, Ground, Inference, Lemma, Position, Postulate, Premise, Premiss |
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The Fisher hypothesis is the proposition by Irving Fisher that the real interest rate is independent of monetary measures, especially the nominal interest rate. The Fisher equation is
<math>r_r = r_n - \pi.<math>
This means, the real interest rate is the nominal rate minus inflation. Therefore, if <math>r_n<math> rises, so must <math>\pi<math>.
If an economic theory or model has this property, it shows the Fisher effect
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