BIO
Michael Woodford (Chicopee, Massachusetts, United States, 1955) earned a Juris Doctor (JD) degree from Yale Law School in 1980, then went on to complete a PhD in Economics at the Massachusetts Institute of Technology (MIT) in 1983. The following year he took up a professorship in the Department of Economics at Columbia University, where he is currently the John Bates Clark Professor of Political Economy. He has also taught at the University of Chicago and Princeton University. Woodford is a recipient of MacArthur and Guggenheim Fellowships, among others, and is a Fellow of the American Academy of Arts and Sciences, the Econometric Society and the Society for the Advancement of Economic Theory. He is also a Research Associate at the National Bureau of Economic Research (Cambridge, Massachusetts), a Research Fellow at the Centre for Economic Policy Research (London) and a member of the CESifo Research Network (Munich). In 2024 he was distinguished with the Erwin Plein Nemmers Prize in Economics.
CONTRIBUTION
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.
