In a remarkable recognition of their academic excellence, Olivier Blanchard, along with fellow economists Jordi Galí and Michael Woodford, has been awarded the 2025 BBVA Foundation Frontiers of Knowledge Award in Economics, Finance, and Management. This accolade stems from Blanchard’s significant contributions to modern macroeconomic analysis, where he established foundational frameworks for examining fluctuations in business cycles, as highlighted in the BBVA Foundation’s citation.
These esteemed MIT alumni collaborated to develop the New Keynesian model, which is integral to contemporary economic theory and central banking practices globally. This model incorporates the influence of consumer expectations on macroeconomic policy, effectively using public perceptions about the future to guide current decision-making.
The New Keynesian framework manifests its value through its innovative tools, including enhanced transparency in monetary policy, a practice that has been pivotal for policymakers, especially after economic setbacks such as the dotcom bubble burst and the 2008 financial crisis.
Blanchard’s influential role began with his collaborative research in 1987 on the impacts of monetary policy within monopolistic competition. Later, Woodford elaborated on optimal monetary policy, forming a crucial theoretical underpinning, while Galí refined the model, providing essential insights into monetary policy design.
Having joined MIT in 1983 and led the Economics Department from 1998 to 2003, Blanchard has mentored countless students, including Galí. His tenure as chief economist at the IMF during the Global Financial Crisis further demonstrated the practical application of his theoretical work.
MIT’s current Economics Department head, Jonathan Gruber, lauds Blanchard’s pivotal role in both research and departmental leadership, underscoring his lasting impact amidst ongoing global economic challenges.
Together, Blanchard, Galí, and Woodford will receive a 400,000-euro prize and be celebrated in a ceremony in Bilbao, Spain, in June. The BBVA Foundation aims to honour transformative contributions across scientific and cultural landscapes, with the Frontiers of Knowledge Awards spotlighting exceptional research and innovation.
Olivier Blanchard, Jordi Galí, and Michael Woodford win the 2025 BBVA Foundation Frontiers of Knowledge Award for their significant contributions to the New Keynesian model, influencing macroeconomic analysis and policy globally. Blanchard’s foundational research and mentorship at MIT highlight his role in shaping contemporary economics. The trio will share a 400,000-euro prize and be honoured in Bilbao, Spain, in June.
The BBVA Foundation Frontiers of Knowledge Award celebrates the profound impact of Olivier Blanchard, Jordi Galí, and Michael Woodford on modern economics. Their collaborative work in developing the New Keynesian model has reshaped macroeconomic analysis and policy, influencing central banking practices worldwide. Their mentorship and leadership, particularly Blanchard’s, continue to inspire future economists, showcasing the enduring legacy of MIT’s Economics Department in navigating complex global economic issues.
Original Source: newsoffice.mit.edu
