In 2025, Olivier Blanchard, an esteemed PhD graduate from MIT, received the BBVA Foundation Frontiers of Knowledge Award in Economics, Finance and Management. This accolade recognises his significant impact on modern macroeconomic analysis, primarily through establishing robust foundations for understanding business cycle fluctuations. Blanchard, also a senior fellow at the Peterson Institute for International Economics, shares this honour with fellow MIT alumni Jordi Galí and Michael Woodford, both pivotal in the development of the New Keynesian model widely applied in global central banking policies.
The New Keynesian framework builds upon traditional Keynesian models by factoring in consumer expectations, using public perceptions of future economic conditions to shape current policy decisions. This approach, including a focus on transparency in monetary policy, proved effective for policymakers following the dotcom bubble burst in the early 2000s and was integral to responses by the Federal Reserve and the European Central Bank during the 2008 financial crisis.
Blanchard’s foundational contributions began with a pivotal 1987 paper he co-authored with Nobuhiro Kiyotaki on monetary policy effects in monopolistic competition. Years later, Woodford articulated optimal monetary policy within the New Keynesian context, and Galí further expanded this framework, crafting guidelines for effective monetary policy design.
Beginning his tenure at MIT in 1983 and leading the economics department from 1998 to 2003, Blanchard has profoundly influenced generations of macroeconomics students, including Galí. His experience as chief economist of the International Monetary Fund from 2008 to 2015 saw him deploying his economic theories to navigate the Global Financial Crisis and the Euro debt crisis, emphasising his extensive role in both academia and policy advising.
Jonathan Gruber, the current head of MIT’s economics department, commended Blanchard’s wide-ranging impacts, asserting, “Olivier is not only an amazing macroeconomist… but also a pillar of the department.”
Blanchard, Galí, and Woodford will share the 400,000-euro prize associated with the award, with a formal ceremony set for June in Bilbao, Spain. The BBVA Foundation, which champions scientific research and cultural creation, has awarded numerous MIT faculty members since 2009, highlighting outstanding global research and innovation in various fields.
Olivier Blanchard, a distinguished MIT economist, received the BBVA Foundation Frontiers of Knowledge Award in 2025 for his influential work in macroeconomic analysis. He shares this honour with fellow MIT graduates Jordi Galí and Michael Woodford, who developed the New Keynesian model. Their contributions have set a foundation for modern monetary policy, applied globally in financial crises. Blanchard’s leadership in academia greatly shaped other economists, illustrating the impact of his revolutionary ideas.
The BBVA Foundation Frontiers of Knowledge Award acknowledges the extraordinary contributions of economists Olivier Blanchard, Jordi Galí, and Michael Woodford to the field of macroeconomics, particularly through their development of the New Keynesian model. Their collective work has revolutionised the understanding and application of monetary policy, influencing global economic practices. Blanchard’s tenure at MIT and leadership roles underscore the lasting impact of his scholarship in shaping future economists and guiding pivotal economic policy.
Original Source: news.mit.edu
