Fisher Equation Calculator

This useful calculator uses the Fisher equation to calculate the real interest rate, nominal interest rate, and inflation rate.

You can use this calculator in three simple steps.

  1. Choose to calculate the real interest rate, nominal interest rate, or inflation rate from the options available.
  2. Enter the relevant information in the fields below.
  3. Click on the "Calculate" button to generate the results.
Fisher Equation Calculator

Results

What is the Fisher Equation?

The Fisher Equation was first proposed by American economist Irving Fisher. It represents an economics concept that is used to delineate the relationship between the real and nominal interest rates in the presence of inflation. According to the equation, the nominal interest rate equals the total of the real interest rate added to inflation.

The Fisher equation is frequently used when lenders or investors seek an additional reward to compensate for any losses in purchasing power they encounter as a result of an increase in inflation.

It is also commonly employed within the disciplines of economics and finance; for example, it may be used to forecast real and nominal interest rate patterns or compute the returns on investment.

The Fisher equation has proven to be useful within the area of monetary policy. The application of the Fisher equation proves that monetary policy can move nominal interest rates and inflation in the same direction. However, it does not influence the real interest rate.

Fisher Equation Formula

The Fisher equation is as follows:

(1 + i) = (1 + r) (1 + π)

Where:

i = nominal interest rate,

r = real interest rate,

π = inflation rate.

The formula can be approximated as follows:

i ≈ r + π

 

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