“My job was to try to achieve fiscal consolidation without causing too much pain”

Economist Olivier Blanchard, awarded the 17th BBVA Foundation Frontiers of Knowledge Award in Economics, explains how his work with Nobuhiro Kiyotaki identified a price externality in imperfectly competitive markets: price setters had little incentive to adjust prices when demand shifted, so fluctuations impacted output rather than prices. He also highlights his research on fiscal policy aimed at reducing deficits without triggering deep recessions and his proposal to create coalitions of the willing—groups of countries committed to fair trade rules—as a response to rising protectionism and the erosion of international economic norms.

The BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category in this seventeenth edition has gone to Professors Olivers Blanchard, Jordi Galí and Michael Woodford for “profoundly influencing modern macroeconomic analysis by establishing rigorous foundations for the study of business cycle fluctuations.”