The Mundell-Fleming Model

Peijie Wang ()
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Peijie Wang: University of Hull, Business School

Chapter 7 in The Economics of Foreign Exchange and Global Finance, 2009, pp 1-28 from Springer

Abstract: The Mundell-Fleming model works with the assumption that prices are fixed. This means that the aggregate supply curve is flat (horizontal in the extreme) and income is determined by the aggregate demand only. Therefore, analysis in this chapter is in the IS-LM framework, extended to incorporate the external sector – the balance of payments, to become IS–LM–BP analysis, as studied in Section 5.2 of the previous chapter. The model has been originated in a series of papers and collections by Mundell (1960, 1961, 1962, 1963 and 1964) and Fleming (1962 and 1971). The background, history and development of the Mundell-Fleming model can be found in Mundell (2001) and Obstfeld (2001), which the interested reader may refer to.

Keywords: Monetary Policy; Current Account; Fiscal Policy; Capital Mobility; Exchange Rate Regime (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-00100-0_7

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DOI: 10.1007/978-3-642-00100-0_7

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