Thursday, December 15, 2011

BIS - IFC Bulletin 1997, November

"...With respect to the role of money in the economy, Fisher contributed more to statistics and policy than to theory. Through out his life Fisher considered in stability of the value of money as a major social and economic evil. He took up the very old notion laid down in the quantity theory of money to analyse the role of money in the economy. His Equation of Ex change, MV = PT, is probably the best-known formula ever used by an economist. He introduced this equation in 1911, in his book The Purchasing Power of Money. To eliminate the social draw backs of price in stability, he propagated a kind of indexation by adapting the gold content of the dollar to the movements in the general price level. It is interesting to note that in Fisher’s view the money supply consisted not only of currency and bank notes, but also of bank deposits. The management of the money supply was primarily to be directed at the process with underlies the creation of bank deposits. This kind of reasoning is nowadays so self- evident that it is difficult to imagine that it was not generally understood when Fisher first came up with it..."


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