School of Economics

Professor Nobuhiro Kiyotaki receives Honorary Doctorate

The University of Edinburgh and School of Economics were delighted to present Professor Nobuhiro Kiyotaki with an Honorary Doctor of Science degree on Friday 29 November 2019. Previous recipients of the Honorary Doctorate are Professor James Mirrlees and Professor Angus Deaton, both of whom went on to win the Nobel Prize in Economics.

Professor Kiyotaki is the Harold H. Helm ’20 Professor of Economics and Banking at Princeton University. He has previously held positions at the London School of Economics, and the Universities of Minnesota and Wisconsin. He obtained his PhD from Harvard University. He has won several awards for his research including the Nakahara Prize, the Yrjo Jahnsson Award, the Stephen A. Ross Prize in Financial Economics, and the Banque de France Prize in Monetary Economics and Finance. He is a Fellow of the Econometric Society and the British Academy.

At the graduation ceremony, Professor Jonathan Thomas of the School of Economics delivered the following ovation:

Nobuhiro Kiyotaki
"Mr Vice-Chancellor, in the name and by the authority of the Senatus Academicus, I have the honour to present for the Honorary Degree of Doctor of Science in Social Science Professor Nobuhiro Kiyotaki
The profession of economics has been criticised for not anticipating the financial crisis of 2008 nor for having the right framework to address the fallout from the crisis. One economist against whom such charges cannot be levelled is Nobu Kiyotaki.
It is true that the models in use in central banks at the outset of the financial crisis were partly built on Nobu’s early work as a doctoral student at Harvard. With his supervisor, Olivier Blanchard, the paper on “Monopolistic Competition and the Effects of Aggregate Demand”, gave us a way of thinking about the effects of aggregate demand in an economy when markets are less than perfect. This 1987 paper paved the way for all subsequent developments in so-called New Keynesian economics.
However, back in 1997, his paper “Credit Cycles”, joint with John Moore of the University of Edinburgh, showed how financial frictions can fundamentally impact on business-cycles. At that time, a lot of research effort was put into trying to conceive business cycle models capable of producing a plausible amount of intrinsic persistence. The collateral constraint emphasized in the Kiyotaki-Moore paper is central to the amplification of the business cycle. Higher asset prices increase collateral values and the ratio of debt to income. The novelty of the paper is to insert this mechanism into a simple, elegant, model of the business cycle and to show how such frictions can indeed shape fluctuations and impart a substantial degree of persistence.
It took the profession slightly more than ten years and the biggest recession since the Great Depression to rediscover the fascinating explanatory power entrenched in this model. It has now become a central ingredient of many setups, most of which have been developed in central banks in reaction to their urgent need for models to study non-conventional measures.
Nobu tells an anecdote about his childhood, when his grandfather would take him out for lavish meals in the best sushi restaurant in Tokyo. His grandfather owned a bank, and these experiences apparently have helped to shape his approach to modelling the behaviour of banks. This was work he undertook after his move to Princeton.  In fact, as the crisis was unfolding, he was already developing, together with Mark Gertler, a new framework to understand how disruptions to banking can adversely affect the economy, and how unconventional monetary policies can help mitigate its consequences. This work has been hugely influential.
Finally, one other contribution that I would like to single out is his 1989 paper “On Money as a Medium of Exchange”, with Randall Wright, one of the most fundamental contributions to monetary theory. The paper expands on some classical ideas of Knut Wicksell, and illustrates once more his ability to develop very profound ideas in a very simple framework.
Mr Vice-Chancellor, in view of his extraordinary contribution to the subject of economics, I now invite you to confer on Professor Nobuhiro Kiyotaki the Honorary Degree of Doctor of Science in Social Science."

Professor Kiyotaki is a co-investigator on a major ESRC project at the University of Edinburgh, MacCaLM, which brings together a group of leading economists to re-examine macroeconomic theory, with a particular focus on how malfunctions in labour and financial markets lie at the root of macroeconomic failure.