Robert A. Mundell
Robert Mundell was awarded the 1999 Nobel Prize in economics “for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas.”
In much of the work on macroe
Robert A. Mundell
Robert Mundell was awarded the 1999 Nobel Prize in economics “for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas.”
In much of the work on macroeconomics before Mundell’s work of the early 1960s, economists assumed—implicitly or explicitly—a closed economy, that is, an economy with no trade with other countries and no capital movements between countries. This was never a good assumption, and it became an even worse assumption as trade and capital flows expanded relative to various countries’ gross national products. Possibly because he grew up in Canada (even then America’s major trading partner) and did his undergraduate education at the University of British Columbia, Mundell was more aware than most American macroeconomists of the importance of international trade and international capital flows. The vast majority of Mundell’s work over his lifetime has been on some aspect of trade or capital flows.
One of the first major questions Mundell addressed was how governments should stabilize economies—keeping them growing while avoiding high inflation—in a world of trade and capital flows. He showed that when the exchange rate is fixed, as it was throughout the 1950s and 1960s between all major trading countries, stabilizing the economy with 