Uploaded February 2025 | Updated September 2026, 3 weeks ago
The BBVA Foundation Frontiers of Knowledge Awards in Economics, Finance and Management has gone in this seventeenth edition to Olivier Blanchard (Paris School of Economics and MIT), Jordi Galí (CREI and Pompeu Fabra University), and Michael Woodford (Columbia University) for “profoundly influencing modern macroeconomic analysis by establishing rigorous foundations for the study of business cycle fluctuations.”
Michael Woodford wrote “the bible” of the most widely used model in monetary policy for more than fifteen years. This is how Olivier Blanchard defines it and is recognized by the academic community. Woodford developed a new generation of dynamic general equilibrium models that were just as rigorous in their methodological foundations as those used previously, but which allowed monetary policy to matter for the economy (something that was completely ruled out in previous models). This involved generalizing the assumption that markets are not perfectly competitive, introducing imperfect competition, and introducing lags in the adjustment of both prices and wages in the economy.
These advances in modeling methodology then allowed monetary policy to be considered as having a central role. The best and worst monetary policies could be discussed and their effectiveness in the real economy, on households and firms, could be tested. In addition, Woodford defined some of the main instruments that have been widely used since the 2008 financial crisis, such as forward guidance, the management of expectations of future interest rates as a mechanism to act on current interest rates and transmit certainty to economic agents, including the markets.
00:04 Professor Galí, what has been your role as the architect of the New
Keynesian paradigm?
01:42 Specifically, what are the three fundamental equations that define the
macroeconomic model that you proposed?
02:43 What are microfoundations and what are the implications of incorporating them into the macroeconomic model?
Discover more here: frontiersofknowledgeawards-fbbva.es
Follow us and learn about all our initiatives: fbbva.es/en
The BBVA Foundation Frontiers of Knowledge Awards in Economics, Finance and Management has gone in this seventeenth edition to Olivier Blanchard (Paris School of Economics and MIT), Jordi Galí (CREI and Pompeu Fabra University), and Michael Woodford (Columbia University) for “profoundly influencing modern macroeconomic analysis by establishing rigorous foundations for the study of business cycle fluctuations.”
Michael Woodford wrote “the bible” of the most widely used model in monetary policy for more than fifteen years. This is how Olivier Blanchard defines it and is recognized by the academic community. Woodford developed a new generation of dynamic general equilibrium models that were just as rigorous in their methodological foundations as those used previously, but which allowed monetary policy to matter for the economy (something that was completely ruled out in previous models). This involved generalizing the assumption that markets are not perfectly competitive, introducing imperfect competition, and introducing lags in the adjustment of both prices and wages in the economy.
These advances in modeling methodology then allowed monetary policy to be considered as having a central role. The best and worst monetary policies could be discussed and their effectiveness in the real economy, on households and firms, could be tested. In addition, Woodford defined some of the main instruments that have been widely used since the 2008 financial crisis, such as forward guidance, the management of expectations of future interest rates as a mechanism to act on current interest rates and transmit certainty to economic agents, including the markets.
00:04 Professor Galí, what has been your role as the architect of the New
Keynesian paradigm?
01:42 Specifically, what are the three fundamental equations that define the
macroeconomic model that you proposed?
02:43 What are microfoundations and what are the implications of incorporating them into the macroeconomic model?
Discover more here: frontiersofknowledgeawards-fbbva.es
Follow us and learn about all our initiatives: fbbva.es/en
