Add to ORKGIn Appreciation and Interest Irving Fisher (1896) derived an equation connecting interest rates in any two standards of value. The original Fisher equation (OFE, 1896) was expressed in terms of the expected appreciation of money (the real return on money) whereas the conventional Fisher equation (CFE, 1930) uses expected inflation. Since the OFE is based on the value of money (l/P) it is not subject to standard criticisms of irrationality leveled against the CFE. Fisher\u27s puzzling substitution of lagged inflation for money appreciation in 1930 is resolved by taking into account his theory of "money illusion."JEL Classification Codes: B00, E40, B13, B22, B31Revised version: Discussion Paper : 07-05http://www.grips.ac.jp/list/jp/facultyinf...