PSE Professor
Prizes and distinctions : Olivier Blanchard wins the Frontiers of Knowledge Award of the BBVA Foundation
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The seventeenth BBVA Foundation Frontiers of Knowledge Award in Economics, Finance and Management has gone to Olivier Blanchard, professor at the Paris School of Economics, alongside Jordi Galí (CREI, Universitat Pompeu Fabra) and Michael Woodford (Columbia University), in recognition of their profound influence on modern macroeconomics and the design of monetary and fiscal policy rules.
Olivier Blanchard’s founding role in New Keynesian economics can be traced to a joint 1987 paper with Nobuhiro Kiyotaki (Princeton University). They studied the effects of monetary policy under monopolistic competition.
What we argued was that there was a price externality in the sense that in an environment of imperfect competition, price setters had very little incentive to change their prices in response to demand. But the result of each price not changing was that the price level didn’t move, and this led the demand effect to fall on output rather than on prices. I think our contribution was more to clarify the mechanism, but the paper was very influential.
The BBVA Foundation Frontiers of Knowledge Awards recognize and reward contributions of major impact in science, technology, humanities, and music. They privilege those that significantly enlarge the stock of knowledge in a discipline, open up new fields, or build bridges between disciplinary areas. Established in 2008, their goal is to celebrate and promote the value of knowledge as a global public good.