Robert Mundell, a renowned economist and 1999 Nobel laureate in economics, died at his home in Italy on Sunday (4) after a long illness at the age of 88. (Photo credit: Internet)
Robert Mundell, a leading economist and 1999 Nobel Laureate in economics, died at his home in Italy on Sunday (4) after a long illness at the age of 88. His main academic achievements include pioneering research in the field of dynamic money and put forward the theory of optimal currency area, to promote the development of supply-side economics and laid the foundation for the birth of the euro, thus gaining the reputation of “the father of the euro”. Since its official creation on January 1, 1999, the euro has become one of the world’s most important currencies.
On January 1, 1999, the euro was officially created. EU leaders hope to use the euro to enhance the unity within the EU and improve Europe’s external position. The launch of the euro is a truly historic event, not only because of its complexity and careful preparation, but also mainly because of its far-reaching economic and political impact on member states and even the international monetary system.
In fact, the introduction of a single currency in Europe originated from a bold idea put forward by the economist Mundell in the 1960s.
In the 1960s, Mundell had the foresight to predict that in a more open economy, exchange rate movements and high capital mobility would have a significant impact on economic policy. He laid down the theory of the euro with an article on the “Optimum Inflation Zone”, which eventually led to the successful introduction of the euro.
Mundell “optimal currency zone” theory points out that two or more regions to form a currency zone, that is, to use a common currency, should meet two conditions: one is the economic situation of each region to be similar, one is the free flow of resources in each region. Since the regions use a common currency, there is only a common monetary and exchange rate policy, monetary policy to be wide together, to raise interest rates together, to appreciate together, to depreciate together.
The “Economic and Monetary Union” (EMU) has long been the goal of European integration politicians. The European Central Bank was established in 1998, and the introduction of a single currency, the establishment of a common monetary institution, the reduction of war and geographical risks, and the avoidance or even the resolution of political conflicts were seen as the ideal direction for the development of a “stronger union”.
In that year, 11 European Union member states met the euro convergence criteria, and thus the eurozone was established with the official emergence of the euro on January 1, 1999.
Greece met the criteria in 2000 and joined the eurozone on January 1, 2001, and on January 1, 2002, the physical euro banknotes and coins were officially issued to replace all national currencies. eight new countries joined the eurozone in the EU after 2007.
In addition to the official Eurozone countries, formal agreements with the EU for Andorra, Monaco, San Marino and the Vatican allow these countries to use the Euro as their official currency and to issue their own coins. Kosovo and Montenegro have unilaterally adopted the euro, but are not full members of the eurozone and are not represented in the European Central Bank or the Eurogroup.
As the theoretical founders of the euro, Mundell has a high opinion of the birth of the euro. In a published article, he said, “The euro is probably the most important development in the international monetary system since the outbreak of World War I, when the dollar replaced the dominant currency of the pound.”
The euro became an important symbol of political and social integration in Europe, with more than 340 million European people using it, and allowed Europe to take an economic leap forward during the years of peace. Mundell is therefore revered as the “Father of the Euro.”
In a speech to mark the euro’s 20th anniversary on Dec. 31, 2018, then European Commission President Jean-Claude Juncker said the euro has become a symbol of unity, sovereignty and stability, “It has brought prosperity and protection to our citizens, and we must ensure that it continues to do so. This is why we are working to complete our ‘economic and monetary union’, while the EU further promotes the euro’s international role.”
However, the euro also brings disadvantages. Critics say the euro’s “one-size-fits-all” strategy is unsuitable for a region with vastly different member states. The loss of an independent monetary policy also means that member states cannot devalue their currencies in order to regain competitiveness.
German economist Hortmar Issing (Otmar Issing) pointed out that since the creation of the euro, until now there is no legal provisions on the “exit from the eurozone”. Therefore, if the disorder of a country to the extreme of the conflict, then the collapse of the euro itself is no longer an unlikely event.
According to Wikipedia, Mundell was born in Kingston, Ontario, Canada, and received a bachelor’s degree in economics from the University of British Columbia, a master’s degree in literature from the University of Washington, and a doctorate in philosophy from the Massachusetts Institute of Technology in 1956, after studying at the London School of Economics. In 2006, Mondale received an honorary doctorate in law from the University of Waterloo. From 1965 to 1972, he was professor of economics at the University of Chicago and editor of the journal Political Economy. For the next two years he served as chairman of the Department of Economics at the University of Waterloo and, from 1974, as professor of economics at Columbia University. He also held a position as Professor of Economics at McGill University.
On October 13, 1999, the Royal Swedish Academy of Sciences awarded Mundell the Nobel Prize in Economics for his great contribution to “the analysis of monetary and fiscal policies under different exchange rate regimes and optimal monetary areas”. A seven-page citation from the Royal Swedish Academy of Sciences confirms his status as the “father of the euro”.
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