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Nobel Award Winning Work Got Start at MIT

By Sanjay Basu

Robert A. Mundell Ph.D. ’56, a Columbia University Professor and former economist for the International Monetary Fund, was awarded the Nobel Prize in Economics Wednesday for work related to his MIT Ph.D. thesis.

“Dr. Mundell’s prize reminds us again of the distinction, reach, and pioneering nature of MIT’s Department of Economics. It has had a profound effect on economic thinking, education and pollicy throughout the world. We are all proud of the part that the department played in launching Dr. Mundell’s exceptional career,” said Charles M. Vest.

Mundell, who completed his doctoral thesis here under the direction of Professor Emeritus Charles Kindleberger, is an expert on International Capital Markets. The Royal Swedish Academy of Sciences recognized him for two papers he wrote less than a decade after completing his thesis work.

According to the Academy, “Robert Mundell has established the foundation for the theory which dominates practical policy considerations of monetary and fiscal policy in open economies ... Although dating back several decades, Mundell's contributions remain outstanding and constitute the core of teaching in international macroeconomics.”

In a paper published in 1961, Mundell described why a nation might choose not to maintain its own currency under specific circumstances. He outlined a full analysis of these circumstances over 30 years before the European Monetary Union began circulating the Euro.

In a second paper published in 1963, Mundell related currency savings and interest rates to fiscal and monetary policies.

“Under a floating exchange rate,” concluded Mundell, according to the Nobel Committee, “monetary policy becomes powerful and fiscal policy powerless, whereas the opposite is true when the exchange rate is fixed.”

Mundell laid the foundation for these conclusions in his MIT Ph.D. thesis, entitled “Essays in the Theory of International Capital Markets.”

He arrived at MIT after obtaining his B.A. from the University of British Columbia and after studying at the London School of Economics. Mundell was a post-doctoral fellow in Political Economy at the University of Chicago until 1957, after which he taught at Stanford University and the Johns Hopkins Bologna Center of Advanced International Studies.

Mundell was a Professor of Economics at the University of Chicago and edited the Journal of Political Economy from 1966 to 1971. He began teaching at Columbia University in New York in 1974.