The Mundell-Fleming Model Revisited

Liang-Shing Fan and Chuen-Mei Fan

The American Economist, 2002, vol. 46, issue 1, 42-49

Abstract: With the globalization of the world economy, improved international capital mobility, and the popularity of fixed (pegged) exchange rates among small developing and transition economies, the Mundell-Fleming model has reasserted its importance as an analytical tool. This paper surveys the Mundell-Fleming model in major macroeconomics and international economics textbooks. In the graphical presentations, all textbooks use the traditional IS-LM curves in the (y, i) plane except Mankiw who presents a model in the (y, e) plane with a unique addition of the effect of import restriction policies. It is generally known that fiscal expansions will worsen the trade balance. A synthesized model is presented in which a necessary condition for such effect is derived.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:sae:amerec:v:46:y:2002:i:1:p:42-49

DOI: 10.1177/056943450204600106

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