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1900–1950: Fisher, Wicksell, Marshall and Keynes

The eminent economist Irving Fisher, building upon work by Newcomb, developed the theory further in what has been called "The Golden Age of the quantity theory", formalizing the equation of exchange and attempting to measure the velocity of money independently empirically. Fisher insisted on the long-run neutrality of money, but admitted that money was not neutral during transition periods of up to 10 years. Another renowned monetary economist, Knut Wicksell, criticized the quantity theory of money, citing the notion of a "pure credit economy". Wicksell instead emphasized real shocks as a cause of observed price movements and developed his theory of the natural rate of interest to explain why the monetary authority should stabilize by setting the interest rate rather than the quantity of money – a position that has received renewed attention during the 21st century, exemplified in the influential Taylor rule of monetary policy.