The Mundell-Fleming Model: A Quarter Century Later
43 Pages Posted: 15 Feb 2006
Date Written: July 2, 1987
The Mundell-Fleming model of international macroeconomics originated in the early 1960s and was extended during the ensuing quarter century. This paper develops an exposition which integrates the various facets of the model and incorporates its extensions into a unified analytical framework. Attention is given to (i) the distinction between short-run and long-run effects of policies, (ii) the implications of debt and tax finance of government expenditures and (iii) the role of the exchange rate regime in this regard. By identifying the key mechanisms operating in the model the exposition clarifies its limitations and facilitates comparison with other more modern approaches.
JEL Classification: 4310
Suggested Citation: Suggested Citation