Mundell-Fleming model: The Hallmarks of the Mundell-Fleming Model

Mundell-Fleming model

Mundell-Fleming model: Diagrammatic Representation

Mundell-Fleming model: Policy Shocks

Mundell-Fleming model: Coining of the Expression

The Mundell-Fleming model is based on a small group of papers, including Fleming (1962) and Mundell (1963). Others, such as Mundell (1960, 1961, and 1962), at times have been incorporated into the rubric,butdoing so risks jeopardizing the key insights derived from the central papers. Some of Mundell’s papers (e.g.,Mundell 1960) presentmodelsdesignedto generate comparative static results that are independent of the nature of the exchange-rate regime in effect. Others (e.g., Mundell 1961) find comparative static results that contradict the ineffectiveness conclusions of the central papers. A key reason for this is that many of these papers assume that monetary policy can be gauged in terms of the level of interest rates rather than the quantity of money outstanding. Still others (e.g., Mundell 1962) are phrased entirely in dynamic terms rather than in the comparative statics one finds in the central papers.

Readers of these central papers face daunting challenges, as the mathematics presented is either elliptical (Mundell) or complicated (Fleming). But what is distinctive about these papers is that they employ a definition of monetary policy that maintains its coherence when capital mobility becomes perfect, and that they deal consistently with the flexible exchange rate case.