Mundell-Fleming Model

“This model must be one of the most influential advances in macroeconomics in recent times.”
Economic Times

“It still serves as the default model for most policy-makers. Further, the predictions of the model are so striking and intuitive that they continue to represent the benchmark against which the predictions of newer models are tested.”
Andrew K. Rose

Robert Mundell has established the foundation for the theory which dominates practical policy considerations of monetary and fiscal policy in open economies. His work on monetary dynamics and optimum currency areas has inspired generations of researchers. Although dating back several decades, Mundell’s contributions remain outstanding and constitute the core of teaching in international macroeconomics.
Nobel Prize Press Release


One of the most significant advances made by Robert Mundell was the extension of the standard workhorse of macroeconomics — the IS-LM model of the Hicks-Hansen synthesis — to an open economy.

The Mundell-Flemming model, as it came to be known, was the first to integrate international monetary flows into macroeconomic analysis. In the early 1960s, this model had foreseen the importance of international capital flows in determining key macroeconomic variables such as real national income, unemployment, price level and the interest rate.