Mundell said he always followed the tradition of the great economists, from Adam Smith to Keynes, who believed in fixed exchange rates based on gold or the world currency.
Mundell considered one of his important achievements to be a journal article from 1960, in which he showed that, with a floating exchange rate, monetary policy becomes a powerful tool for influencing output, and fiscal policy is powerless, whereas with a fixed exchange rate the opposite is observed. This model also shows that, given a fixed exchange rate, a country cannot pursue an independent monetary policy in the long run, and if an independent monetary policy is pursued, fixed exchange rates are not possible.
With regard to exchange rates, he posed a new and fundamental question: under what circumstances is it advisable for a group of countries to abandon monetary sovereignty in favor of a common currency? Mundell's ideas regarding the formation of currency zones were later used to create a single currency in Europe. Did Europe meet the definition of an optimal currency area? Although Europe did not meet all the criteria he set (such as high labor mobility), he was an active supporter of the introduction of a single currency “Some say that over the past 10 years, economic development in Europe has been worse than in the United States, but they forget, that Europe's population growth is zero and that the growth rate of per capita income in Europe is not much lower than that in the United States, ”he wrote.
“If it were Mundell's will, he would turn the whole world into one big optimal currency area with a single currency. But he admits that political rivalry complicates this task, since a necessary condition for the creation of a monetary union (worldwide or otherwise) is the creation of a security zone. He believes that in a world where countries are periodically at war with each other, a monetary union is possible only if it is based on precious metals. Gold can still be used as a reserve asset in the reformed international monetary system of the 21st century, ”the IMF magazine wrote about it.
In recent years, Mundell was engaged in the creation of a "semi-convertible" yuan. He believed that if the yuan becomes fully convertible, then the growth rate of China will fall by 3 times. He became an "honorary citizen" of Beijing and an honorary professor at 30 Chinese universities.
When Mundell was once asked where he, as an economist, would advise ordinary people to invest, he answered shortly: "In what you understand and love." And he gave his example: “In 1969, I bought a castle along with 1.5 hectares of vineyards and a garden in Siena, Italy for $ 20,000. Then I invested $ 400,000 in water supply and electricity in the castle. Now (in 2005) it costs $ 4 million. And I also make wine there. "