Robert Mundell

Robert MundellRobert Mundell (born in 1932) is a Canadian economist and professor at Columbia University. He won the Noble Prize in Economic Sciences in 1999 for his theory in optimum currency areas, which focuses on a series of characteristics required so that monetary unions can be optimal, and therefore sustainable and economically efficient in the long run, as stated in his paper “A Theory of Optimum Currency Areas”, 1961. He raised special interest amongst European economists due to his support for the creation of a European Monetary Union and of the Euro.

He is a strong defender, and one of the developers, of supply-side economics that argues that economic growth will be most effective if it’s originated by supply-side policies.

Mundell and Marcus Fleming, from papers written separately by the two authors, designed the Mundell-Fleming model, -also called IS-LM-BoP model-, through which they expand the traditional IS-LM model into a context of an open economy. This model explains why there cannot be an economy with an independent monetary policy if it maintains a fixed exchange rate, and there is free movement of capital and payments; this situation is known as the “impossible trinity”. Mundell’s paper “Capital mobility and stabilization policy under fixed and flexible exchange rates”, 1963,  analyses the case of perfect mobility of capital.

Given his contributions and thoughts about monetary policy, it can be said that Mundell belongs to the Chicago School and is a fervent supporter of an open economy, in the trend of globalization.