Resource title

Beggar Thy Neighbour: Exchange Rate Regime Misadvice from Misunderstandings of Mundell (1961)

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Resource description

Mundell's optimal currency area model has been misconstrued, being at base an argument against multiple currencies as Mundell himself stated in that paper and frequently since. This paper shows two things. First use of this model has generated beggar-thy-neighbour advice concerning exchange rate changes. Second, because of its certainty assumptions, the model's findings that an exchange rate change could restore equilibrium after certain types of shocks is only plausible if 1) there to have been no prior exchange rate change in living memory, and 2) if there is something precluding any currency area subsequently generating another exchange rate change.

Resource author

Robin Pope

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22976

Resource license

Adapt according to the presented license agreement and reference the original author.