Mundell, Robert Alexander (1932-2021), a Canadian-born economist, was awarded the 1999 Nobel Prize for economics. He received the prize for his ideas on how governments’ efforts to stabilize their own economies are affected by international factors.
Governments use two important tools called monetary policy and fiscal policy to stabilize their economies. A government uses monetary policy to control interest rates and the money supply. Fiscal policy refers to a government’s taxing and spending programs.
In his book International Economics (1968), Mundell described his analysis of monetary and fiscal policy in economies that trade freely with other countries. At the time Mundell voiced his theories, governments focused on their own economies and did not consider the potential impact of international economics. Mundell concluded that if a country fixes its currency at a specific value against foreign currencies, its fiscal policy becomes powerful and its monetary policy weakens. But if the country does not fix its currency against foreign currencies, the opposite is true.
Mundell also made important contributions on how currencies are valued, and the advantages and disadvantages of a common currency used by several nations. This work had an important impact on the launching of the euro, the currency now shared by numerous European nations. See Euro .
Mundell was born in Kingston, Ontario. He received a Ph.D. degree in economics from the Massachusetts Institute of Technology in 1956. He taught at universities in Canada, the United States, and Italy. Mundell did some of his most important work in the 1960’s while teaching at the University of Chicago. He also served as an adviser to many international agencies, including the United Nations, the International Monetary Fund, the World Bank, and the European Commission. Mundell died on April 4, 2021.
