Robert Alexander Mundell CC  Biography - Nobel Prize Winner (1999)


Robert Alexander Mundell CC (born October 24, 1932) is a Canadian economist who graduated from the University of British Columbia in Vancouver. He attended MIT, where he obtained his PhD in Economics in 1956. He also attended the London School of Economics and was a top performer in his years there. He went on to win the 1999 Bank of Sweden prize in Economic Sciences, more commonly referred to as the Nobel prize in economics. Since 1974 he has been a professor in the Economics department at Columbia University; since 2001 he has held Columbia's highest academic rank -- University Professor. In 2002 he was made a Companion of the Order of Canada . In June 2005 he was awarded the Global Economics Prize from the World Economics Institute in Kiel, Germany and in September 2005 he was made a Cavaliere di Gran Croce del Reale Ordine del Merito sotto il Titolo di San Ludovico by Principe Don Carlo Ugo di Borbone Parma.

Robert MundellAmong his major contributions are:

Theoretical work on optimum currency areas.
Contributions to the development of the Euro
Helped start the movement known as supply-side economics.
Historical research on the operation of the gold standard in different eras.
Predicted the inflation of the 1970s.
Mundell-Fleming model
Mundell-Tobin effect

Work on international monetary flows
Mundell is best known in politics for his support of tax cuts and supply side economics; however, among economists it is his work on currency areas and international exchange rates which caused him to be awarded the Bank of Sweden prize. Nevertheless, supply side economics featured prominently in his Bank of Sweden prize speech.

In the 1960s Canada, of which Mundell is a native, floated its exchange - this caused Mundell to begin investigating the results of floating exchange rates, a phenomenon not widely seen since the 1930's "Stockholm School" successfully lobbied Sweden to leave the gold standard.

In 1962 he co-authored the Mundell-Fleming model of exchange rates, and noted that it was impossible to have both domestic autonomy, and price stability and free capital flows - that two, and only two, of these objectives could be met. The model is, in effect, an extension of the IS/LM model applied to currency rates.

According to Mundell's analysis:

Discipline under the Bretton Woods system was more due to the US Federal Reserve than to the discipline of gold.
Demand side fiscal policy would be ineffective in restraining central banks under a floating exchange rate system.
Single currency zones relied, therefore, on similar levels of price stability, where a single monetary policy would suffice for all.
His analysis led to his conclusion that it was a disagreement between Europe and the United States over the rate of inflation, partially to finance the Vietnam War, and that Bretton Woods disintegrated because of the undervaluing of gold and the consequent monetary discipline breakdown. There is a famous point/counter-point over this issue between Mundell and Milton Friedman (See Mundell-Friedman debate)

This work would later lead to the creation of the Euro, and his prediction that leaving the Bretton Woods system would lead to "stagflation" so long as highly progressive income tax rates applied. In 1974 he advocated a drastic tax reduction and a flattening of income tax rates.

Mundell, though lionized by some conservatives, has many of his harshest critics from the right: he denies the need for a fixed gold based currency or currency board - though he often recommends this as a policy in hyper-inflationary environments - and he is both a fiscal and balance of payments deficit hawk. He is well known for stating that in a floating exchange rate system, expansion of the money supply can only come about through a positive balance of payments.

November 2005: Professor Mundell’s position on the Chinese Renminbi is as follows:
The US and international authorities should stop pressuring China for substantial appreciation of its currency. Substantial appreciation (e.g., 25%) would undermine China’s growth miracle; aggravate the problem of non-performing loans of the banking system, delay convertibility of the RMB, weaken China’s compliance with WTO, cause deflation in the poor rural sector, unravel the role of China as a major processing center, and cause a major recession in Asia. China has used the dollar as its anchor because the dollar has served as the de facto world currency since the 1930s and the anchor serves as a rudder for China’s macroeconomic policy .just as it did for Japan and West Germany in the period of their growth miracles in the 1950s and 1960s.

Appreciation would not have any important effect on the US current account deficit which obeys a logic of its own. The U.S. had mainly deficits when it was a debtor nation before World War I, surpluses as it built up a strong creditor position between 1915 and 1970 and has had deficits since the late 1970s, and crossed over into being a growing debtor nation in the late 1980s. China has played very little role in these stages of the US balance of payments, which have more to do with international savings-investment behavior based on demographic factors and the role of the dollar as the principal international currency.

Rather than seeking to destabilize China’s currency, the U.S. and the IMF should help China to bring its balance of payments closer to equilibrium by opening up its markets, and moving in the direction of currency convertibility, at the same time creating a stable currency for the global economy that can be used as an anchor for all countries that would benefit from it.

Akerlof, George A.
Allais, Maurice
Arrow, Kenneth J.
Aumann, Robert J.
Becker, Gary S.
Buchanan, James M., Jr.
Coase, Ronald H.
Debreu, Gerard
Engle, Robert F.
Fogel, Robert W.
Friedman, Milton
Frisch, Ragnar
Granger, Clive W. J.
Haavelmo, Trygve
Harsanyi, John C.
Heckman, James J.
Hayek, Friedrich August Von
Hicks, Sir John R.
Kahneman, Daniel
Kantorovich, Leonid Vitaliyevich
Klein, Lawrence R.
Koopmans, Tjalling C.
Kuznets, Simon
Kydland, Finn E.
Leontief, Wassily
Lewis, Sir Arthur
Lucas, Robert
Markowitz, Harry M.
McFadden, Daniel L.
Meade, James E.
Merton, Robert C.
Miller, Merton M.
Mirrlees, James A.
Modigliani, Franco
Mundell, Robert A.
Myrdal, Gunnar
Nash, John F.
North, Douglass C.
Ohlin, Bertil
Prescott, Edward C.
Samuelson, Paul A.
Schelling, Thomas C.
Scholes, Myron S.
Schultz, Theodore W.
Selten, Reinhard
Sen, Amartya
Sharpe, William F.
Simon, Herbert A.
Smith, Vernon L.
Solow, Robert M.
Spence, A. Michael
Stigler, George J.
Stiglitz, Joseph E.
Stone, Sir Richard
Tinbergen, Jan
Tobin, James
Vickrey, William

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