The Canadian-born economist "has established the foundation for the theory which dominates practical policy considerations of monetary and fiscal policy in open economies," the Royal Swedish Academy of Sciences said.

"His work on monetary dynamics and optimum currency areas has inspired generations of researchers. Mundell's contributions remain outstanding and constitute the core of teaching in international macroeconomics," the Academy said.

Mundell's most important work was done in the 1960s, the Academy said. He served in the research department of the International Monetary Fund (IMF) from 1961 to 1963, which "apparently stimulated Mundell's choice of research problems; it also gave his research additional leverage among economic policy makers," it said.

He published a pioneering articlein 1963 on the short-term effects of monetary and fiscal policy in an open economy, the citation said. "The analysis is simple, but the conclusions are numerous, robust and clear."

"Mundell's considerations, several decades ago, seem highly relevant today," the Academy said. "Due to increasingly higher capital mobility in the world economy, regimes with a temporarily fixed, but adjustable, exchange rate have become more fragile; such regimes are also being called into question," the academy said.