Around the world with Irving Fisher

• Irving Fisher gathered data on interest rates and inflation in six cities 1825–1927.
• The six cities were New York, London, Paris, Berlin, Calcutta, and Tokyo.
• Fisher's data show a negative effect of increased inflation on real interest rates
• Nominal interest rates adjusted neither quickly nor fully to inflation rates.

This paper aims to show why Irving Fisher's own data on interest rates and inflation in New York, London, Paris, Berlin, Calcutta, and Tokyo during 1825–1927 suggested to him that nominal interest rates adjusted neither quickly nor fully to changes in inflation, not even in the long run. In Fisher's data, interest rates evolve less rapidly than inflation and change less than inflation over time. Even so, the “Fisher effect” is commonly defined as a point-for-point effect of inflation on nominal interest rates rather than what Fisher actually found: a persistent negative effect of increased inflation on real interest rates.