In discussions surrounding of the world’s monetary systems today there is usually one thing almost everyone can agree on: that money should be controlled by the organizations we call “states” or “sovereign states.” Nowadays when we say “the US dollar” we mean the currency issued by the US government
Richard Cooper, Robert Mundell, and John Williamson made important contributions on a variety of topics in international economics throughout their careers, particularly in terms of how we think about currency arrangements. This column reviews the work of all three, tracing their ideas and drawing lessons for policymakers today.
Paul De Grauwe
The opening sentence of Robert Mundell’s 1963 paper “Capital mobility and stabilization policy under fixed and flexible exchange rates” one of the two most influential in a series of pathbreaking papers he published in the late 1950s and early 1960s is curious: “The world is still a closed economy, but its regions and countries are becoming increasingly open.”
“Still”? Was Mundell thinking of a future with interplanetary trade, so that eventually the world as a whole
wouldn’t be a closed economy? OK, he probably wasn’t, but if he was, it would have been in character. Mundell, who passed away on 4 April, was an economist ahead of his time.