Press release English Swedish

Other Contributions
Mundell has made other contributions to macroeconomic theory. He has shown, for example, that higher inflation can induce investors to lower their cash balances in favor of increased real capital formation. As a result, even expected inflation might have a real economic effect – which has come to be known as the Mundell-Tobin effect. Mundell has also made lasting contributions to international trade theory. He has clarified how the international mobility of labor and capital tends to equalize commodity prices among countries, even if foreign trade is limited by trade barriers. This may be regarded as the mirror image of the well-known Heckscher-Ohlin-Samuelson result that free trade of goods tends to bring about equalization of the rewards to labor and capital among countries, even if international capital movements and migration are limited. These results provide a clear prediction: trade barriers stimulate international mobility of labor and capital, whereas barriers to migration and capital movements stimulate commodity trade.

Robert A. Mundell

1932-2021

Robert Mundell was awarded the 1999 Nobel Prize in economics “for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas.”
In much of the work on macroeconomics before Mundell’s work of the early 1960s, economists assumed—implicitly or explicitly—a closed economy, that is, an economy with no trade with other countries and no capital movements between countries. This was never a good assumption, and it became an even worse assumption as trade and capital flows expanded relative to various countries’ gross national products. Possibly because he grew up in Canada (even then America’s major trading partner) and did his undergraduate education at the University of British Columbia, Mundell was more aware than most American macroeconomists of the importance of international trade and