Contact Us

For Marketing, Sales and Subscriptions Inquiries
Rockefeller Center, 45 Rockefeller Plaza
20th Flr Unit #5, New York, NY 10111
United States

Conference List

The Economics and Finance Letters

June 2021, Volume 8, 1, pp 53-60

Are the Predictions of the Mundell-Fleming Model Applicable to Mexico?

Yu Hsing

Yu Hsing 1

  1. Department of Management & Business Administration College of Business Southeastern Louisiana University Hammond, Louisiana, USA. 1

on Google Scholar
on PubMed

Pages: 53-60

DOI: 10.18488/journal.29.2021.81.53.60

Share :

Article History:

Received: 20 February, 2020
Revised: 23 December, 2020
Accepted: 12 January, 2021
Published: 15 February, 2021


According to the Mundell-Fleming model (Romer, 2006) under a floating exchange rate system, fiscal expansion is ineffective in raising output and causes real appreciation whereas monetary expansion raises output and causes real depreciation. Applying an extended Mundell-Fleming model, this paper employs a simultaneous-equation model to test whether the predictions of the Mundell-Fleming model would apply to Mexico. The GARCH process is employed in empirical work. This study finds that fiscal expansion reduces output and causes real appreciation and that monetary expansion raises output and leads to real depreciation. In addition, a higher real interest rate reduces output and causes real appreciation, and a higher real stock price results in real appreciation. Therefore, except for the impact of fiscal expansion on output, the Mundell-Fleming model applies to Mexico.
Contribution/ Originality
This paper relaxes the assumption of no relationship between real money demand and the real exchange rate in the Mundell-Fleming model, uses a simultaneous-equation model to estimate real GDP and the real effective exchange rate, and includes the real stock price as a proxy for financial wealth.


Fiscal expansion, Monetary expansion, Exchange rates, Mundell-Fleming model, Appreciation/depreciation, Money demand.


Best, G. (2013). Fear of floating or monetary policy as usual? A structural analysis of Mexico's monetary policy. The North American Journal of Economics and Finance, 24, 45-62.Available at:

Bhattacharyya, I., & Mukherjee, A. (2018). Does fiscal policy matter for growth? Evidence from emerging market economies. Reserve Bank of India Occasional Papers, 39(1-2), 39-67.

Carriere-Swallow, M. Y., David, M. A., & Leigh, M. D. (2018). The macroeconomic effects of fiscal consolidation in emerging economies: Evidence from Latin America. Wahsington, DC: International Monetary Fund.

Demid, E. (2018). Fiscal and monetary policy: Coordination or conflict? International Economic Journal, 32(4), 547-571.

Esquivel, C., Kehoe, T. J., & Nicolini, J. P. (2019). Lessons from the monetary and fiscal history of Latin America. University of Chicago, Becker Friedman Institute for Economics Working Paper, (2019-47).

Fan, L.-S., & Fan, C.-m. (2002). The mundell-feming model revisited. The American Economist, 46(1), 42-49.Available at:

Fleming, J. M. (1962). Domestic financial policies under fixed and under floating exchange rates. Staff Papers, 9(3), 369-380.

Friedman, M. (1988). Money and the stock market. Journal of Political Economy, 96(2), 221-245.

Mankiw, N. G. (2019). Macroeconomics (10th ed.). New York: Worth Publishers.

Mankiw, N. G. (2000). Macroeconomics (4th ed.). New York: Worth Publishers.

Meza, F. (2018). Mexico from the 1960s to the 21st Century: From fiscal dominance to debt crisis to low inflation. Working Paper, Centro de Investigacion Economica, ITAM, Mexico.

Mishkin, F. S., & Savastano, M. A. (2001). Monetary policy strategies for Latin America. Wahsington, DC: The World Bank.

Mishkin, F. S. (1995). Symposium on the monetary transmission mechanism. Journal of Economic Perspectives, 9(4), 3-10.

Mundell, R. A. (1963). Capital mobility and stabilization policy under fixed and flexible exchange rates. Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique, 29(4), 475-485.Available at:

Mundell, R. A. (2001). On the history of the Mundell–Fleming model. Keynote speech. International Monetary Fund Staff Papers Special Issue, 47, 215-227.

Nelson, D. B., & Cao, C. Q. (1992). Inequality constraints in the univariate GARCH Model. Journal of Business and Economic Statistics, 10(3), 229-235.Available at:

Obstfeld, M. (2001). International macroeconomics: Beyond the Mundell-Fleming model. International Monetary Fund Staff Papers, 47, 1–39.

Priftis, R., & Zimic, S. (2018). Sources of borrowing and fiscal multipliers. ECB Working Paper No. 2209.

Romer, D. (2006). Advanced macroeconomics. Massachusetts: Boston: McGraw-Hill/Irwin.

Sanchez-Juarez, I., García, R., & Barajas, H. (2016). The relationship between total production and public spending in Mexico: Keynes versus Wagner. International Journal of Financial Research, 7(1), 109-120.Available at:

Tran, N. (2018). Debt threshold for fiscal sustainability assessment in emerging economies. Journal of Policy Modeling, 40(2), 375-394.Available at:


Google Scholor ideas Microsoft Academic Search bing Google Scholor


This study received no specific financial support.

Competing Interests:

The author declares that there are no conflicts of interests regarding the publication of this paper.


Related Article

( 1 ) Financial Market Predictions with Factorization Machines: Trading the Opening Hour Based on Overnight Social Media Data
( 2 ) Are the Predictions of the Mundell-Fleming Model Applicable to Mexico?
( 4 ) The Development of Participated Environmental Education Model for Sustainable Mangrove Forest Management on Eastern Part of Thailand
( 5 ) The Impact of Human Capital on Economic Growth: Evidence from Tunisia Using Star and Stecm Models
( 6 ) An Inventory Model with Lost Sale is Time Dependent
( 7 ) A Model of Strategic Thinking: Islamic and Iranian Perspective
( 8 ) Stock Market Performance and Economic Growth: Evidence from Nigeria Employing Vector Error Correction Model Framework
( 9 ) Workplace Bullying: Modelling Construct Validity in an Australian Public Sector Workforce
( 10 ) Estimating Value at Risk for Sukuk Market Using Generalized Auto Regressive Conditional Heteroskedasticity Models
( 11 ) Dynamic Analysis of Competitive Technology Innovation Diffusion Model
( 12 ) A Review upon the Changes Which Come With the Model upon Turkish Metropolitan Municipality within the Provincial Administrative Boundaries
( 13 ) Confirming the Mediation Effect of A Structural Model By Using Bootstrap Approach: A Case Study of Malaysian 8th Grade Students’ Mathematics Achievement
( 14 ) The Effect of Exchange Rate Changes on Consumer Prices in Nigeria: Evidence from VECM Model
( 15 ) Examining Long Run Relationship between Household Debt and Household Savings in South Africa – An Error Correction Model and Granger Causality
( 16 ) Comparative Analysis of the Effectiveness of Coub-Douglas, Real Business Cycle, and Keynsian Growth Models in Determining Economic Growth in Nigeria
( 17 ) An Econometric Planning Model of Urban Forestry as a Measure of Sustainability: A Matrix of Action and Change
( 18 ) On the Prediction of the Inflation Crises of South Africa Using Markov-Switching Bayesian Vector Autoregressive and Logistic Regression Models
( 19 ) Triple Hurdle Model with Zero Expenditures
( 20 ) Dutch Disease: Myth or Reality? An Analysis of the ARDL Model
( 21 ) Consumers’ Behavioural Intention to Adopt Mobile Banking in Rural Sub-Saharan Africa Using an Extension of Technology Acceptance Model: Lessons from Zimbabwe
( 22 ) Evaluating the Model of Demand for Money in Nigeria
( 23 ) Developing a Conceptual Model for Antecedents of Resistance to Change towards Sustainable Construction Practices
( 24 ) Towards a Proposal of a Local Authority Model Based on the Systemic Approach
( 25 ) A Process Model for Conformance of Health Information Systems: Towards National Interoperability
( 26 ) Role of Talent Development on Talent Engagement and Self-Efficacy: A Structural Model
( 27 ) Modelling Stock Returns Volatility and Asymmetric News Effect: A Global Perspective
( 29 ) Fear of Covid-19 and Intentions towards Adopting E-Health Services: Exploring the Technology Acceptance Model in the Scenario of Pandemic
( 30 ) The Optimal Machine Learning Modeling of Brent Crude Oil Price
( 31 ) Modeling and Estimation of Cumulative Abnormal Return using VECM
( 32 ) Likelihood of Insurance Coverage on Damages Due to Level of Insecurity in Nigeria: Logistic Modeling Approach
( 34 ) Contemporary Approach to Enhanced Road Transport System in Nigeria Through the Application of It-Based (Online) Bus Ticketing and Payment System
( 35 ) Making Poverty A History in Africa: The Role of the G8
( 36 ) External Factors Influencing on Industrial Building System (Ibs) in Malaysia
( 37 ) Consideration the Relationship Between Information Communications Technology and Economic Growth in Top 10 Economic
( 38 ) NGO Programming and Policy Advocacy in the Land Sector in Zimbabwe
( 39 ) Testing the Random Walks in Korea Stock Exchange
( 40 ) How Telecommunication Development Aids Economic Growth: Evidence from Itu Ict Development Index (IDI) Top Five Countries for African Region
( 41 ) Kashmir Peasant Economy under Dogra’s: A Case Study of Agrarian Produce and Livestock 1885-1925 A.D
( 42 ) Driving Role of Institutional Investors in the Indian Stock Market in Short and Long-Run – An Empirical Study
( 43 ) An Enquiry into the Contributions of Microfinance Institutions Towards the Development of Small Scale Business in Nigeria
( 44 ) A Review on Criteria for Green Infrastructure to be Adopted by Local Authorities
( 45 ) Does the Mena Countries May Converge in GDP to Southern European One? The Effects of International Trade
( 47 ) Reminiscing Stock Splits Announcement: A Malaysian Case
( 48 ) The Sustainable Livelihoods Index: A Tool To Assess the Ability and Preparedness of the Rural Poor in Receiving Entrepreneurial Project
( 49 ) Study of the Relationship between Economic Growth and Inflation: Application to the Countries of the South Side of the Mediterranean: A Panel Data Approach
( 50 ) A Study of Transnational and Transformation Leadership Styles and Factors Affect The Leadership Style
( 51 ) Testing the Random Walk: The Case of Hong Kong Stock Exchange
( 52 ) Rate of Return Would Not Increase To the Extent of Annuity Saving Discount
( 53 ) Government Borrowing Behaviour: Implications for Private Sector Growth in Nigeria
( 54 ) Earnings Management and Stock Market Returns
( 55 ) The Recruitment of Migrant Workers in the Food Service Industry in Malaysia. A Study of Old Town White Coffee and Pappa Rich Kopitiam
( 56 ) Quality Management Practices towards Customer Satisfaction in Local Authority Public Services Website
( 57 ) Consideration the Effects of Water Sector Investment on Economic Growth in Iran
( 58 ) A Theoretical Review on Critical Success Factors (CSFS) of Entrepreneurship Programs in Community College
( 59 ) Influence Internship Learning Effect in Business Service Sector: Using Internship Self-Efficacy as the Mediator Variable
( 60 ) The Impact of Dividend Policy on Shareholders’ Wealth before and After Financial Melt down: Evidence from FMCG Sector in India
( 62 ) Factors Impacting on SMEs Internationalization: Dairy Industry in Zimbabwe
( 63 ) The Biodiesel Market in Brazil and the Prospects for the Sector
( 64 ) A Mixed-Methods Study to Explore Stage of Readiness and Intention of Micro and Small Enterprises to Adopt Mobile Money in Indonesia
( 65 ) Attributes Influencing Strategic Alignment in the Service Sector: An Indonesian Banking Sector Case Study
( 67 ) The Effect of Selected Financial Ratios on Profitability: An Empirical Analysis of Listed Firms of Cement Sector in Saudi Arabia
( 68 ) Stock Market Index Prediction with Neural Network during Financial Crises: A Review on Bist-100
( 69 ) The Total Factor Productivity of Libyan Banks, 2004 – 2010
( 70 ) The Life-Time of Tomorrow Party of Japan and Its Negative Impacts on the Anti-Nuclear Movements in Japan’s Politics
( 71 ) Exploration of Suitability of Situational Leadership in the Oil and Gas Sector
( 73 ) The Impact of the Global Financial Crisis on the Debt, Liquidity, Growth, and Volume of Companies in Palestine Stock Exchange
( 74 ) Rural - Urban Balance as a Measure of Socio-Economic Development with Special Reference to Iran
( 75 ) Measuring the Quality of Islamic Banks Services and Its Impact on Customers Satisfaction A Survey Study on the Islamic Banks Customers in Lattakia-Syria
( 76 ) A Negative Rational Pigs Game and its Applications to Website Management
( 77 ) The Internal Branding Process: Customer Reprofiling and Brand Positioning (Empirical Study on Traditional Snack Food in Bandung-Indonesia)
( 78 ) Appointment of Directors and Performance of Deposit Money Banks in Sub Saharan Africa: Do We Need More Executive or Non-Executive Directors?
( 79 ) Managing Public Perception towards Local Government Administration
( 80 ) Studying the Integration of Damascus Securities Exchange with Selected Stock Markets
( 81 ) Market Share and Profitability Relationship: A Study of the Banking Sector in Nigeria
( 82 ) Effect of Media Transportation and Advertising Transportation on Customers Responsiveness
( 83 ) The Effect of Personal Factors on the Customer Rating of the Quality of Services of the Islamic Banks Operating in the Syrian Coast
( 84 ) A Factor Analysis Approach Towards a Study of the Factors Affecting Students’ Choice of Higher Education Institution: A Case Study of a Private Institution (Twintech International University College of Technology)
( 85 ) Does the Holiday Effect Differ from Religious to Non-Religious Holidays? Empirical Evidence from Egypt
( 86 ) Auditing Procedures and Process in the Public Sector
( 87 ) Rice Farmer and Capital Formation: A Case Study of Rice Farmer's Credit Cooperative in Itoikin, Ikosi-Ejirin LCDA, Lagos State
( 88 ) Internationalization of State Multilatinas: A Multi-Case Study in The Oil Sector
( 89 ) Relevance of Stakeholders Theory, Organizational Identity Theory and Social Exchange Theory to Corporate Social Responsibility and Employees Performance in the Commercial Banks in Nigeria
( 90 ) Public Sector Size and GDP Growth Nexus: Panel Data Estimation
( 91 ) Analyzing Factors Affecting the Success of Social Media Posts for B2b Networks: A Fractional-Factorial Design Approach
( 93 ) Entrepreneurial Networking and Women Entrepreneurs’ Contribution to Employment Creation in Rivers State, Nigeria
( 94 ) Participatory Processes in Planning for Self-Help Housing Provision in South Africa: Policies and Challenges
( 95 ) Scenario Economic Impact Analysis of Offshore Fishing Tournaments in Ocean City
( 96 ) Effect of Institutional Factors on Foreign Direct Investment in Nigeria
( 97 ) Does Gold Price Lead or Lags Islamic Stock Market and Strategy Commodity Price? A Study from Malaysia
( 98 ) An Investigation into the Causes of Failures in Railway Infrastructure at Transnet Freight Rail - A Case of the Steel and Cement Business Unit
( 99 ) Macroeconomic Indicators and Capital Formation Growth in Nigeria: A New Evidence
( 101 ) The Effect of Internal and External Factors of Companies on Profitability and its Implications on Stock Price Index of State-Owned Banks
( 102 ) An Empirical Investigation into the Key Drivers of Economic Performance in the CEMAC Zone: A Panel Corrected Standard Errors Approach
( 103 ) Leading Indicators and Financial Crisis: A Multi-Sectoral Approach Using Signal Extraction
( 104 ) Incorporating Islamic Ethic Elements into Marketing Mix Paradigm
( 105 ) Intention to Use E-Recruitment System: Empirical Evidence from Jobseekers in the Advertising Industry in Malaysia
( 106 ) The Importance of Public Administration Towards Achieving Good Governance for Positive National Development by Using SmartPLS 3
( 107 ) Depositors Confidence and Mergers and Acquisitions: The Nigerian Banking Sector Experience
( 108 ) Does Agricultural Sector Contribute to the Economic Growth in Case of Republic of Benin?
( 109 ) Determinants of Public Sector Corruption in Nigeria
( 110 ) Impact of Participatory Decision Making on Organisational Goal Attainment
( 111 ) Conceptualisation of Lack of Discipline and Probity as the Main Cause towards Good Governance Practice
( 112 ) The Impact of Organisational Culture on Public Sector Performance: A Case Study of Local Authorities in Zimbabwe
( 113 ) Sectoral Credit Allocation of Deposit Money Banks and Poverty Reduction in Nigeria
( 114 ) Foreign Direct Investment - Growth Linkage in Sub-Saharan Africa: Is Governance a Mediating Factor?
( 115 ) An Empirical Assessment of the Impact of Access to Credit on Farm Output: A Case Study of Sefwi-Wiawso Municipality Ghana
( 116 ) Factors that Influence Profitability of General Insurance Issuers in Indonesia
( 117 ) Impact of Exchange Rate Fluctuation on Selected Economic Sectors of the Nigerian Economy
( 118 ) Determinants of Banks Profitability & Liquidity and the Role of BASEL III in Islamic & Conventional Banking Sector of Pakistan: A Case Study of NBP
( 119 ) Factors Influencing Human Capital in Ready Made Garments Industry in Bangladesh
( 120 ) Analysis of the Effects of Pull and Push Factors on Brain Drain: An Example of Turkey
( 121 ) Analysis of Environmental Factors Affecting Manufacturing Small and Medium-Size Enterprises in Kogi State Nigeria
( 122 ) Regime Changes in the Volatility of Stock Markets
( 123 ) Optimal Stock Portfolio Issuers of Building Construction Registered in LQ45 Based on the Markowitz Approach
( 124 ) Estimating the Economic Determinants of Technical Efficiency of Bioenergy in EU-28: An Application of Tobit Analysis
( 125 ) Does Social Barriers Influence Women's Intention toward Entrepreneurship?
( 126 ) The Effect of Selected Factors on Tax Revenue Mobilization in Ethiopia: The Case of Amhara Region
( 127 ) Deterrents to the Success of Micro and Small Enterprises in Ethiopia: The Case of Amhara Region MSEs
( 128 ) Assessing the Perceived Value of Customers for being Satisfied towards the Sustainability of Hypermarket in Malaysia
( 129 ) Family Leadership and Small to Medium Sized Enterprises Research and Development Investments
( 130 ) Exchange Rate Pass-through to Prices: VAR Evidence for Albania
( 131 ) Challenges and Opportunities of Investment to the People of Sebeta Town, Oromia Regional State, Ethiopia
( 132 ) The Trajectory and Diaspora of Women Imprisonment: An Analysis
( 134 ) Value for Money (VFM) Audit and Public Sector Performance in Afikpo North Local Government Area of Ebonyi State, Nigeria
( 135 ) Multivariate Analysis in Formulation of the Benefit-Cost Index Related to the Sugarcane Production System in the Quirinopolis Municipality Productive Center, Goias, Brazil
( 136 ) What are the Contextual Influences of Bank Criminality in Osun East Senatorial District?
( 137 ) Analysing the Financial Strength of Nigeria: An Approach to Estimate the Index of Financial Safety
( 138 ) Trade Union Performance and Industrial Relations Climate in the Nigerian Petroleum Sector
( 139 ) Nexus between Non-Oil Sectoral Contribution and Economic Growth in Nigeria 1981-2018
( 140 ) An Empirical Investigation of Real Exchange Rate Responses to Foreign Currency Inflows: Revisiting the Dutch Disease Phenomenon in South Asia
( 141 ) Factors Affecting the Individual Stock Price Index (IHSI) Industrial Manufacturing Sector in Indonesia, Automotive Sub Sectors, and Components in Indonesia Stock Exchange (IDX)
( 142 ) Effect of Brand Enhancement on Buying Behavior towards the Sport Sponsorship Companies in Riyadh, KSA
( 143 ) Efficiency of Microfinance (MF) Institutions in Bangladesh: A Study on Top 10 MF Institutions
( 144 ) Critical Review of Literature on Brand Equity and Customer Loyalty
( 145 ) Factors Influencing on Human Resources Development in SMEs Service Enterprises in Industry 4.0: The Case of Thai Nguyen Province, Vietnam
( 146 ) Analysis of Causal Nexus between Defense Spending and Economic Growth in Nigeria: A Toda-Yamamoto Approach
( 147 ) Determinant of Tax Revenue Effort in Sub-Saharan African Countries: A Stochastic Frontier Analysis
( 148 ) Effect of Savings Deposit Rate on Stock Market Capitalization in Nigeria: An Empirical Investigation
( 149 ) The Relationship between Creative Accounting Risks and Auditing Risks from the Perspective of External Auditors in Saudi Arabia
( 150 ) Determinants of Profitability and its Implications on Corporate Values (Studies at Ceramic, Porcelain and Glass Sub Sector Listed in Indonesia Stock Exchange, 2009 - 2018)
( 151 ) Self-Efficacy and Entrepreneurial Mindset: Towards Societal Re-Engineering
( 154 ) Interest Rate Ceilings and Financial Exclusion in Kenya: Evidence from Commercial Banks’ Sectoral Credit Distribution
( 155 ) Factors Affecting the Capital Structure of the Textile Industry in Bangladesh: An Inferential Study
( 156 ) Deficit Financing Asymmetry and Nigerias Economic Growth: A Nonlinear Autoregressive Distributed Lag Approach
( 157 ) The Dimensions of the Quality Perceived by Users in a Clinical Analysis Laboratory of A University Hospital
( 159 ) Factors Influencing Audit Expense and Quality in an Emerging Economy: A Study on Bangladesh
( 160 ) The Effect of Disruptive Factors on Inventory Control as a Mediator and Organizational Performance in Health Department of Punjab, Pakistan
( 161 ) Factors Influencing Farmers’ Adoption of Soil Conservation Development
( 162 ) Factors Affecting Profitability of General Insurance Companies in Indonesia
( 163 ) Exploring the Dimensions Using Exploratory Factor Analysis of Disruptive Factors and Inventory Control
( 164 ) Panel Data Estimators in the Presence of Serial and Spatial Correlation with Panel Heteroscedasticity: A Simulation Study
( 165 ) The Impact of Data Frequency on the Level of Exchange Rate Pass-through to Consumer Prices in Nigeria
( 166 ) What Explains the Overwhelmingly Positive Perception towards Microfinance Institutions? Application of Firth’s Logistic Regression in a Small Sample
( 167 ) Financial Risks in Turkish Banking Industry: A Panel Data Analaysis on Istanbul Stock Exchange
( 168 ) Human Capital Development and Economic Growth in Nigeria: An Autoregressive Distributed Lag (ARDL) Approach
( 169 ) A Qualitative Analysis of the Impediments to Business Innovation and Information Management in Nigeria: A Policy Stance
( 170 ) Analysis of Demographic Factors on Perceptions of Inventory Managers towards Healthcare Performance
( 171 ) Contribution of Domestic Direct Investment and Direct Foreign Investment to Economic Growth in Indonesia Era Joko Widodo
( 172 ) The Euribor and EONIA Reform: Achieving Regulatory Compliance while Protecting Financial Stability
( 173 ) Creative Marketing and Innovative Branding: An Effective Way to Attract Customers
( 174 ) The Reasons Behind the Shift of Patients from Public to Private Hospitals: Evidence from Public Hospitals in Cumilla City Corporation
( 175 ) Assessing Access to Comprehensive HIV Treatment Services for Men Who Have Sex with Men and Female Sex Workers in the Bamenda Health District
( 176 ) The Promise and Reality of Public Sector Reform – A Case Study of the Implementation of Trinidad and Tobagos Health Sector Reform
( 177 ) Cross-Time-Frequency Analysis of Volatility Interdependence among Stock and Currency Markets
( 179 ) A Study on Financial Performance of Transport & Warehouses Firms Listed on the Hanoi Stock Exchange
( 180 ) IT Governance as Drivers of Dynamic Capabilities to Gain Corporate Performance Under the Effects of Environmental Dynamism
( 182 ) Financial Development and Economic Growth in Nigeria: New Evidence from a Threshold Autoregressive and Asymmetric Analysis
( 183 ) Factors Influencing Profitability of Commercial Banks in Tanzania: A Case Study of CRDB Bank Plc
( 184 ) Testing the Validity of Arbitrage Pricing Theory: A Study on Dhaka Stock Exchange Bangladesh
( 185 ) Employee Creative Behaviour: A Predictive Study of Perceived Relational Injustice and Workplace Ostracism among Public Sector Workers