Fisher, Thorton and the analysis of the inflation premium

William Beranek, Thomas M. Humphrey and Richard H. Timberlake

No 84-05, Working Paper from Federal Reserve Bank of Richmond

Abstract: Virtually all references to the Fisher Effect assume that its appearance in nominal interest rates is a simultaneous result of borrower and lender effects. However, Irving Fisher, and Henry Thornton before him emphasized the activist role on the borrower (demand) side of the loan market. Their reasoning is extended here. Borrowers are seen increasing their demands for loans not because they necessarily anticipate inflation, but because the results of inflationary spending first appear on their income statements as higher profits. Ultimately lenders' loan supply schedules shift to the left as they, too, become aware of the decline in real rates. The conclusions reached for the loan market are seen as generalized to all contractual costs in labor and commodity markets.

Keywords: Inflation (Finance); Interest rates (search for similar items in EconPapers)
Date: 1984
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.richmondfed.org/publications/research/working_papers/1984/wp_84-5.cfm (text/html)
https://www.richmondfed.org/-/media/RichmondFedOrg ... /1984/pdf/wp84-5.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedrwp:84-05

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().