The Mismatch of Fisher and His Equation of Exchange: A Proposal to the Federal Reserve System

Abstract

There are fundamental differences between the two forms of equation Fisher expressed. The so-called Fisher equation MV=PT does not represent fisher's real intention. A careful study reveals how later economists mismatch Fisher and his equation of exchange. The mismatch improperly neutralized Fisher's real spirit. Fisher favorite equation demonstrates strongly the money motion tradition which is desolated by most later economists. But the money motion tradition reflects an essential function of money and should be revived by us. However the Fed discontinued to publish the turnover data in 1996, which makes it impossible to revive Fisher's approach. The author analyzes the shortcomings of the strategy Fed adopted for turnover data collection in the past and makes a proposal for the adjustment of the strategy and restoration of the turnover data collection. The Fed holds a leading position in promoting a balanced development of macroeconomics where three major imbalances should be noticed particularly. Up to today, Fisher's quantity theory framework is underdeveloped, so no one of the three imbalances may be eliminated in the foreseen future. Consequently, the reviving of Fisher's quantity framework will play a crucial role in the macroeconomics of the 21st century.