Olivier Blanchard PhD ’77, the Robert M. Solow Professor of Economics Emeritus, has been recognized as a recipient of the 2025 BBVA Foundation Frontiers of Knowledge Award in Economics, Finance, and Management for “profoundly affecting contemporary macroeconomic analysis by establishing rigorous foundations for the examination of business cycle variations,” as noted in the BBVA Foundation’s award citation.
Blanchard, who additionally serves as a senior fellow at the Peterson Institute for International Economics, shares the accolade with MIT alumni Jordi Galí PhD ’89 from the Centre de Recerca en Economia Internacional and Pompeu Fabra University in Spain, along with Michael Woodford PhD ’83 from Columbia University. These three economists were pivotal in the advancement of the New Keynesian model, which is now extensively taught and utilized in central banking practices globally.
The framework expands on classical Keynesian models, partially by integrating the significance of consumer expectations into macroeconomic policy evaluation — succinctly, leveraging the public’s outlook on the future to refine present policy decisions. The model’s atypical instruments, including enhanced transparency in monetary policy, were applied by policymakers after the collapse of the dotcom bubble in the early 2000s and utilized by the Federal Reserve and European Central Bank in response to the 2008 financial turmoil.
Blanchard was integral to the creation of New Keynesian economics, beginning with a 1987 manuscript coauthored with Princeton University’s Nobuhiro Kiyotaki (who is also a Frontiers of Knowledge laureate) regarding the impacts of monetary policy in monopolistic competition. A decade later, Woodford articulated optimal monetary policy within the New Keynesian framework, establishing vital theoretical fundamentals for the model, while Galí elaborated and unified the framework, ultimately resulting in a plan for crafting optimal monetary policy.
Blanchard, who became a member of the MIT faculty in 1983 and led the Department of Economics from 1998 to 2003, mentored and instructed generations of macroeconomics students at MIT, including Galí. Serving as the chief economist of the International Monetary Fund from 2008 to 2015, Blanchard utilized his framework to aid in policy development during the Global Financial Crisis and the Euro debt crisis. Blanchard’s influence as a scholar, mentor, educator, and policy advisor lies at the core of the trio’s award-winning research.
MIT Professor Jonathan Gruber, the current department head, commends Blanchard’s diverse contributions.
“Olivier is not just an exceptional macroeconomist whose research continues to profoundly impact this era of global macroeconomic unpredictability,” remarks Gruber, “but also a cornerstone of the department. His guidance in research and immense commitment to our program have been vital in advancing the legacy of the department’s early luminaries and shaping MIT Economics into what it stands today.”
Blanchard, Galí, and Woodford will equally share the award’s 400,000-euro prize and will be formally celebrated at a gathering in Bilbao, Spain, in June.
The BBVA Foundation aims to promote scientific investigation and cultural creation, disseminate knowledge and culture, and acknowledge talent and innovation, concentrating on five strategic domains: environment, biomedicine and health, economy and society, basic sciences and technology, and culture. The Frontiers of Knowledge Awards, encompassing eight prize categories, acknowledge top-tier research and cultural endeavors, aiming to honor and promote the significance of knowledge as a global public asset.
Since 2009, the BBVA has granted honors to more than a dozen MIT faculty members, including MIT economist Daron Acemoglu, as well as to the Abdul Latif Jameel Poverty Action Lab (J-PAL), led by MIT economists Abhijit Banerjee, Esther Duflo, and Ben Olken.