Discussion — Lecture 14 & Reading 7: Robert Mundell

This session covers Lecture 14: Money and the State: International and the Robert Mundell reading, which is a revised version of his 1999 Nobel Prize speech on the international monetary history of the 20th century.

• Lecture 14 Notes
• Mundell Study Questions

Mundell divides the 20th century into three parts. He views the 19th-century gold standard as a stable and efficient international monetary standard that World War I ultimately destroyed. He tells a story of the evolution (devolution?) of the international monetary system over the course of the 20th century. He wants to address exchange rate stability through domestic price level stability, ultimately paving the way for a new international currency: the euro. At the end of the 20th century, he imagines the world moving back toward a stable international money. Mundell is, in many ways, the "father" of the euro. He sees the dollar, euro, and yen as "islands of stability" from which a more stable international monetary order might emerge.

From the course website:

"This piece is meant mainly to set the scene for our discussion of foreign exchange, in the same way that the Allyn Young piece set the scene for Part One. Note the importance that Mundell places on the price of gold—is he a metallist? He also uses the language of discipline and elasticity—is his view compatible with the money view? Note p. 333 his emphasis on US deficit as the source of world reserves, and compare with the Kindleberger reading [upcoming]."

Lecture 14 builds on the reading as an attempt to extend the money view to international monetary systems. Mehrling adds balance sheets to Mundell's account of the 20th century, and continues the story into the early 21st century.

Here is a potentially illuminating 2015 paper from Perry Mehrling:

• Elasticity and Discipline in the Global Swap Network

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