Document Type

Report

Publication Date

8-1975

Number

19

Abstract

Mundell (1962) demonstrated that monetary policy should be paired with external balance and fiscal policy with internal balance. This seminal article led to a voluminous literature^ which attempted to rectify many of the problems inherent in Mundell's flow equilibrium model. Harry Johnson (1972) has characterized this extension of Mundell's work as having lent itself to almost Infinite mathematical product differentiation, with little significant improvement in quality of economic product..." Although we do not fully agree with Harry Johnson--for there are many deficiencies in Mundell'a model-- we do believe that more can be said concerning the "Assignment Problem" in the context of Mundell's model.