Even on the day of the Nobel Prize, economics exams are administered... Woodford “You need to bring your test papers” (comprehensive)

(New York = Yonhap News) Correspondent Lim Soo-jeong = Professor Michael Woodford (71) of Columbia University, who was selected as a co-winner of this year's Nobel Prize in Economics, emphasized the importance of communication between the market and authorities, saying on the 12th (local time), "The government's economic stabilization policy should not be viewed as an act of simply pulling a lever to control the economy."

As a representative example of his research being used in the policy field, Kevin Worth, the current chairman of the Federal Reserve, drew attention by citing 'forward guidance' (preemptive guidance), which he virtually discontinued after taking office this year.

Professor Woodford said this at a press conference held by phone after the Royal Swedish Academy of Sciences announced the winners of the Nobel Prize in Economics, saying, "Policies should not be operated regardless of how economic entities understand the authorities' policies."

He continued, “How people who make decisions about spending in the market anticipate and understand future policies is very important for actual policy effectiveness.”

He added, “It is also important to create a theoretical framework that allows the government to explain and communicate to the public what policies it is implementing,” adding, “That was one of the key goals I was trying to develop an analysis framework for.”

Professor Woodford is a leading scholar of new Keynesian economics, which analyzes the impact of central bank interest rate policies on the economy and reflects the future expectations of households and businesses in macroeconomic models.

In particular, it was theoretically established that the central bank can influence the economy not only by adjusting current interest rates, but also by forming market 'expectations' about future policy paths.

Even in situations where it is difficult to lower interest rates further, reliable policy promises can help stimulate the economy.

Professor Woodford cited the response of each country's central banks during the 2008 global financial crisis as an example of how his research was useful in actual economic policy.

He explained that at the time, several countries, including the United States and Sweden, lowered their base interest rates to virtually zero, but as high unemployment and a lack of aggregate demand continued, it was difficult to restore economic activity through traditional monetary policy measures alone.

It was evaluated that 'forward guidance', which presents the future interest rate policy path more clearly, was used as an important policy tool in the process of responding to this situation in many countries.

He said, “This was a more explicit explanation of what path interest rate policy would take in the future, and it was a different approach from relying only on further lowering interest rates immediately.”

He added, “It didn’t magically solve all the problems, but I think it made an important contribution to stabilizing the economy.”

Some say that this award, which comes at a time when forward guidance has been reduced since Chairman Wash's inauguration, could serve as an opportunity to shine a new light on the importance of managing market expectations and communication in monetary policy.

Professor Woodford cited the Middle East war as a major example of factors threatening the stability of the current global economy.

“There are many cases where events that have no economic origin have a very large impact on the economy,” he said. “To give an example right now, the war in the Middle East is clearly disrupting global energy markets.”

He went on to point out, “Significant changes in energy prices also affect many other sectors of the economy, and this is a common phenomenon in many regions of the world.”

Regarding the development of China's artificial intelligence (AI) technology, he said, "China appears to have quickly risen to a leading position in the technology field, including AI," and added, "China will be able to greatly contribute to the development of the global economy in the coming decades."

Regarding his thoughts on receiving the award, he said, "It's a great honor. It's unexpected, but I'm really happy." He also said, “I was extremely surprised” when he heard the news of the award while he was sleeping around 4:30 a.m.

It was also known that he took scheduled student exams and department work on the day he was awarded the Nobel Prize.

In a separate interview on the Nobel Prize official website, he said, "There is an exam this morning, so I have to go pick up the test papers and booklets for students to write their answers in," and explained that it was a busy day as he also had to meet visitors from the UK and applicants for professorships.

He joked, “Students are probably hoping that I cancel the exam.”

According to Columbia University's website, Professor Woodford personally supervised the exam for the subject 'Cognitive Mechanisms and Economic Behavior' at Uris Hall at 10:10 a.m. on this day. Students congratulated him on winning the Nobel Prize with applause and cheers before the exam.

On this day, the Royal Swedish Academy of Sciences selected Professor Robert Hall (83) of Stanford University, along with Professor Woodford, as winners of the Nobel Prize in Economics and announced that they highly value their research on economic stabilization.