Nobel Prize-winning economist Robert A. Mundell, Ph.D., whose work on international monetary flows paved the way for the creation of the euro, presented, “The Case for a World Currency,” as part of the Spring 2005 Distinguished Lecture Series in Economics on April 18 in Flom Auditorium on the Rose Hill campus.
“The need for a viable international monetary system with a single unit of account will be felt in a truly global economy,” said Mundell, who advocated for a single, global currency as a stabilizing mechanism for inflation, as well as the basis for a common monetary policy among the European Union member nations.
To make his argument, Mundell led his listeners on a tour of monetary and fiscal history, from the first coins struck in the ancient world right up to the dawn of the European Union and the creation of the euro.
Mundell said he sees fixed exchange rates as the catalyst that will tame inflation, unlike the present system in the United States, where floating exchange rates and the effects of constant intervention by the Federal Reserve Bank to regulate the economy can take as long as six months to be felt.
One global currency scenario Mundell proposed includes the three strongest units of currency, the U.S. dollar, the euro and the Japanese yen, joining to form a single currency. He also suggested that the United States and other countries, including Brazil, Mexico and India, could form the Association for Pacific Economic Cooperation, which could eventually include the Eurozone and other countries.
Despite a weak U.S. dollar, recent record stock market lows, and an ever-expanding national debt, Mundell said he doubts the United States would willingly give up the benefits of being the world’s international reserve currency. But, he said, a sharp economic downturn in the near future may leave few other solutions.
Dominick Salvatore, Ph.D., distinguished professor of economics and director of the economics doctoral program at Fordham, introduced Mundell as “one of the most original and creative economic minds of any generation.” Salvatore, who hosts the annual lecture series, also credited the Columbia University professor as one of the originators of supply-side economic theory, and praised the Mundell-Fleming finance model as a workhorse of international macroeconomics.
Mundell received the Nobel Prize in 1999, but it was his groundbreaking work on optimum currency areas, first presented in his book Man and Economics (McGraw-Hill, 1968), which led some to dub him the “father of the Euro.”
The Distinguished Lecture Series in Economics brings prominent lecturers to Fordham to discuss contemporary issues in economics. Previous speakers have included economic luminaries and former Nobel Prize winners such as Lawrence Klein.