Nobel Prize in Economic Sciences 2025. Vlad Rashkovan analyzes the likely winners.

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Every year, IMF Deputy Executive Director Vladyslav Rashkovan makes an attempt to predict who will win one of the most anticipated honors in the economic sphere – Nobel Prize in Economics. His predictions this year focus on issues of combating global financial shocks and rising prices, as well as monetary policy. Will economists like Kenneth Rogoff and Olivier Blanchard be properly rewarded in 2025?

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This year’s winners of the Nobel Prize in Economics will be announced on Monday, October 13, the final day of Nobel Week.

As we know, clearly speaking, calling this award “Nobel” is not entirely correct, since it was the Swedish creator and industrialist Alfred Nobel who did not include it in his will of 1895. The prize in economic sciences was established by the Central Bank of Sweden (Sveriges Riksbank) in memory of Alfred Nobel thanks to a donation received by the Nobel Foundation on the occasion of the central bank’s 300th anniversary in 1968.

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However, this fact does not reduce its prestige. On the contrary, the Economics Prize is currently one of the most anticipated annual awards in the world. In addition, the Royal Swedish Academy of Sciences awards this prize according to the same criteria as the other Nobel prizes, which have existed since 1901.

Since 2019, I have been trying to make a prediction about the laureate. I will try this year as well.

Past forecasts Last year, I predicted the winners were Why Nations Fail and Narrow Corridor authors Daron Acemoglu (MIT) and James Robinson (University of Chicago) and Acemoglu’s Power and Progress co-author, former IMF Chief Economist Simon Johnson (MIT).

The Nobel committee honored this well-known trio for explaining why “communities with weak rule of law and institutions that exploit the population are unable to develop or generate positive change.”

In the three previous predictions, I named candidates who won in subsequent years. In 2019, I was betting on Paul Milgrom (Stanford), but he (along with Robert Wilson, also from Stanford) won the prize in 2020 for improving the theory of auctions.

In 2020, I mentioned Claudia Goldin (the first woman to receive a tenure-track tenure at Harvard Economics), but she was awarded a solo prize in 2023 for research on gender inequality.

In 2021, I supported Ben Bernanke, but he (along with Douglas Diamond of the University of Chicago and Philip Dybwig of Washington University in St. Louis) won the prize for research and understanding of banking crises a year later.

Ben Bernanke, Douglas Diamond and Philip Dybvig, co-winners of the 2022 Sveriges Riksbank Alfred Nobel Prize in Economic Sciences, during the 2022 Nobel Prize Ceremony Photo by Getty Images

This year’s probable laureate is the methodological aspect Before making a prediction, there are three important points to make.

First, according to Konstantin Sonin from the University of Chicago, nothing particularly new is happening in economic science, most scientific discoveries were made many years ago. Therefore, the most likely Nobel candidates in economics are economists who changed the direction of science 20-30-40 years ago (somewhere in the 80s-90s at least, and maybe even earlier) and continue to work in their fields, while other scientists develop new policies and tools based on their theories.

Secondly, since there are almost no new candidates (as, for example, in chemistry last year, when Demis Gassabis from Google DeepMind received the award) in the economy, candidates can be removed from the list either by receiving the award that year, or, unfortunately, by death.

Therefore, we know for sure almost all the contenders who can win the award, the only question is when they will receive it.

The question of “when” is answered by the modern challenges facing the world economy, and how the works of our applicants influenced the understanding of these challenges and the search for solutions that can overcome them.

And finally: in the last five years, the prize was awarded for topics related to the fight against poverty (2019), improving the theory of auctions (2020), applying natural experiments in related sciences (2021), understanding banking crises (2022), understanding the consequences of women entering the labor market (2023), the role of the rule of law and institutions in economic growth (2024).

We have three topics in microeconomics: poverty, auctions, labor market; two – in macroeconomics and political economy: banks, institutions; and one in the field of methods – natural experiments. Since the Nobel Committee is trying to diversify the prizes by field, these topics will most likely not be this year, although they may still go to “methods”.

But taking into account these remarks, I would venture to suggest that the prize this year can be given for one of two problems of our time: the debt that is growing everywhere in the world, or the monetary policy that helped the world overcome post-war inflation. But there are other options.

Kenneth Rogoff, 72, former chief economist of the IMF, now professor of economics at Harvard, American economist and chess grandmaster, one of the leading scholars in the field of comparative economics Photo by Getty Images

Debt in the international economy The IMF warns that global debt has reached $251 trillion, more than 235% of world GDP, and continues to grow. The main reason is that governments are still paying for the expenses of the pandemic.

However, the biggest problem is not in the numbers, but in their consequences.

When governments borrow money en masse, it squeezes the private sector out of the credit market, and loans become more expensive or less available to businesses.

A closed circle emerges: high public debt inhibits private investment, and without investment it is difficult to expand the economy The IMF recommends that governments gradually reduce debt according to a clear long-term strategy. However, the question is whether there is enough political will to do it. So far it doesn’t work.

People who have been studying this topic for a long time are Kenneth Rogoff (former IMF Chief Economist, now Harvard) and Carmen Reinhart (former World Bank Chief Economist, Harvard, most cited female economist in the world).

In their joint book This Time is Different, published by the Ukrainian publishing house “Nash Format” under the title “Cyclical history of financial crises”, Rogoff and Rinehart analyzed 800 years of financial crises in 66 countries and came to a simple conclusion: crises repeat themselves again and again in very similar scenarios.

Economists in their book show a typical country’s path to crisis.

First comes a period of optimism, when debt accumulates quickly, asset prices soar, everyone is sure of endless growth. Then comes a moment when trust disappears and the system collapses.

Their main discovery: when the ratio of debt to GDP exceeds a certain frontiereconomic growth is slowing down sharply. You have seen the debt indicator above.

The book was released in 2009, after the global financial crisis, and is now the most cited resource on debt and financial crises.

It is interesting that its name – This Time is Different – is a kind of irony, because before every crisis, politicians and economists are convinced that “this time everything is different”, that we have learned from past mistakes, that new tools and institutions will protect us. But every time it turns out that nothing has changed.

I had the opportunity to speak with Rogoff and Rinehart many times. The last time was just a month ago, when Rogoff presented his new book Our Dollar, Your Problem about the role of the dollar in global finance at the IMF. And just this week, he presented the Group of 30 report on the future of money. As you can see, he is very active.

The first time I mentioned Rogoff as a contender was back in 2019. In 2020, I mentioned him together with Rinehart. I think that this year, or at least in the coming years, they will receive their reward. Their influence on the economy is really significant.

Daron Acemoglu, Simon Johnson of the Massachusetts Institute of Technology and James Robinson of the University of Chicago are the winners of the 2024 Nobel Prize in Economics. The prize was awarded for the study of “how institutions are formed and how they affect well-being” Photo by Getty Images

Monetary policy Due to massive fiscal stimulus during COVID-19 and the Russian invasion of Ukraine in 2022, which led to a sharp rise in global energy and food prices, the world faced its biggest inflationary jump in decades. Global inflation soared from 4.7% in 2021 to 8.8% in 2022.

The central banks of the countries were able to effectively respond to the unprecedented upheavals of the pandemic and the subsequent inflationary surge. They quickly raised interest rates to curb inflation and keep inflationary expectations under control.

This has been made possible by the fact that since the late 1990s these central banks have significantly improved their monetary policy frameworks, often in the context of a move to inflation targeting. They have received clear mandates focused on price stability, their operational independence has increased significantly, and they have strengthened public accountability and transparency.

The basis of the policy of modern central banks since the 1990s has been determined by principles neo-Keynesian economic theory. This theory states that central banks can stabilize the economy by regulating interest rates and people’s expectations about future monetary policy. It is on these principles that all modern tools of central banks are built: inflation targeting, forward guidance (when the central bank announces its plans in advance) and mathematical models for forecasting the economic situation.

These tools worked – global inflation fell, but the question is who created the theoretical foundation for these tools.

There are a few people who can definitely win the Nobel Prize precisely for “New Keynesianism”. As experts say, no one has yet received a prize for the invention of this line of economic thought.

First, it is, of course, another former chief economist of the IMF, Olivier Blanchard (MIT) and Gregory Mankiw of Harvard, whom I first mentioned together with Rogoff back in 2019.

In recent decades, they have been the most influential macroeconomists in the world.

Blanchard, for example, developed fundamental models that explain the dynamics of unemployment, inflation and the relationship between them. His works showed how central banks should respond to different types of shocks. As the IMF’s chief economist, he directly influenced monetary policy around the world.

In addition to serving as an economic adviser to the 43rd US president, George W. Bush, Mankiw made key contributions to understanding why prices and wages do not change instantaneously in response to economic shocks. His research has shown that the monetary policy of central banks can actually affect production and employment, not just prices.

We studied macroeconomics by Blanchard and Menkiu at the university. Through them, neo-Keynesian ideas spread among the thousands of economists who now work in most of the world’s central banks. They definitely deserve an award.

Also, economic experts point out that if the prize is given this year for issues of monetary policy and the fight against inflation, then among macroeconomists it would be correct to give it to Robert Barro from Harvard.

Barro is one of the founders of the modern view of inflation. His 1973 paper on the optimal choice of monetary policy in a political context was two decades ahead of its time. Even 20 years before its widespread use, he justified the idea of ​​inflation targeting, showing why it is important for central banks to have a reputation for fighting inflation.

His research on monetary neutrality explained when and how monetary policy can affect the real economy, not just prices.

I know less about the work of Michael Woodford of Columbia University, who some pundits are also predicting as a candidate for the prize this year, because his contributions to neo-Keynesian theory are also great.

In 2003, Woodford wrote a seminal book, Interest and Prices, which has effectively become the bible for modern central bankers.

In his writings, he explains how central banks can manage the economy not only by changing current interest rates, but also by managing people’s expectations about future monetary policy, that is, by implementing the same forward guidance. Let’s see if his contribution will be considered significant enough.

Olivier Jean Blanchard, 76, French economist, professor of economics at MIT, former chief economist of the IMF Photo by Getty Images

Other topics I made my bet on two themes this year: debt and the fight against inflation. But experts point out that the Nobel Committee can give the prize, for example, to Ariel Peix (Harvard), Steve Berry and James Levinson (both from Yale University) for empirical research in the theory of industrial organization. Especially considering that the last prize in this field was in 2014 (Jean Tirol), and the problems of global technology giants are a bit confusing for regulators.

In 1995, these three economists developed the so-called BLP the framework is a mathematical model that allows you to estimate how a change in the market structure will affect prices, product quality, and consumer welfare. As a result, their work underpins how regulators make merger and antitrust decisions.

Konstantin Sonin believes that the award can be given to the former head of the Fed and ex-Minister of Finance of the USA Janet Yellen, but not for her work at the central bank, but for her research in labor economics.

Yellen is one of the main researchers of the “fair wage” theory. Her most cited work (with George Akerlof, 2001 Nobel Laureate) tested the hypothesis that when a worker’s pay falls below what he considers “fair,” his productivity declines dramatically.

Yellen’s other famous work is a pioneering study on the mechanisms of female poverty, where she showed the connection between the legalization of abortion, the availability of contraception and “forced marriages”. I’m barely familiar with her work in labor economics, so it’s hard to gauge her perspective.

Janet Yellen, 78, former head of the Fed and ex-Secretary of the US Treasury, American economist and statesman, researcher at the Brookings Institution and professor at the University of California at Berkeley Photo by Getty Images

And the last topic that experts are talking about is the economics of technology and machine learning. The main name here is Susan Atey from Stanford, who in 2007 received the John Bates Clark Medal – one of the most prestigious awards in economic science.

Atey is a pioneer in the application of machine learning and artificial intelligence to economic issues. She developed new empirical methods for analyzing online markets, showed how digital auctions work, how platforms determine prices and algorithms influence consumer behavior.

Given that the economy is becoming increasingly digital and big data is changing the way we investigate economic processes, her contribution seems extremely relevant.

A Nobel Prize for Athey would recognize the growing importance computational methods in the economy. Some experts speculate that she could be awarded alongside Hal Varian (Google’s chief economist) or Oxford’s Paul Klemperer, depending on which aspect the committee focuses on.

However, there is a feeling that it is not yet time for this topic, but the direction is definitely promising for the coming years.

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