Olivier Blanchard PhD ’77, the Robert M. Solow Professor of Economics Emeritus, has been named a winner of the 2025 BBVA Foundation Frontiers of Knowledge Award in Economics, Finance and Management for “profoundly influencing modern macroeconomic analysis by establishing rigorous foundations for the study of business cycle fluctuations,” as described in the BBVA Foundation’s award citation.

Blanchard, who is also senior fellow at the Peterson Institute for International Economics, shares the award with MIT alumni Jordi Galí PhD ’89 of the Centre de Recerca en Economia Internacional and Pompeu Fabra University in Spain and Michael Woodford PhD ’83 of Columbia University. The three economists were instrumental in developing the New Keynesian model, now widely taught and applied in central banking policy around the world.

The framework builds on classical Keynesian models in part by introducing the role of consumer expectations to macroeconomic policy analysis — in short, using the public’s perception of the future to help inform current policy. The model’s unconventional tools, including greater transparency around monetary policy, were tested by policymakers following the burst of the dotcom bubble in the early 2000s and applied by the Federal Reserve and European Central Bank in response to the 2008 financial crisis.

Blanchard played a foundational role in the development of New Keynesian economics, beginning with a 1987 paper coauthored with Princeton University’s Nobuhiro Kiyotaki (also a Frontiers of Knowledge laureate) on the effects of monetary policy under monopolistic competition. A decade later, Woodford described optimal monetary policy within the New Keynesian framework, laying key theoretical groundwork for the model, and Galí extended and synthesized the framework, ultimately resulting in a blueprint for designing optimal monetary policy.

Blanchard, who joined the MIT faculty in 1983 and served as head of the Department of Economics from 1998 to 2003, advised and taught decades of macroeconomics students at MIT, including Galí. As chief economist of the International Monetary Fund from 2008 to 2015, Blanchard used his framework to help design policy during the Global Financial Crisis and the Euro debt crisis. Blanchard’s leadership as a scholar, student advisor, teacher, and policy advisor is at the heart of the trio’s prize-winning research.

MIT Professor Jonathan Gruber, current head of the economics department, praises Blanchard’s multifaceted contributions.

“Olivier is not only an amazing macroeconomist whose work continues to have profound influence in this time of global macroeconomic uncertainty,” says Gruber, “but also a pillar of the department. His leadership in research and enormous dedication to our program were central in carrying forward the legacy of the department’s early greats and making MIT Economics what it is today.”

Blanchard, Galí, and Woodford share the award’s 400,000-euro prize and will be formally honored at a ceremony in Bilbao, Spain, in June.

The BBVA Foundation works to support scientific research and cultural creation, disseminate knowledge and culture, and recognize talent and innovation, focusing on five strategic areas: environment, biomedicine and health, economy and society, basic sciences and technology, and culture. The Frontiers of Knowledge Awards, spanning eight prize categories, recognize world-class research and cultural creation and aim to celebrate and promote the value of knowledge as a global public good.

Since 2009, the BBVA has given awards 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.