The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Kydland, Finn Erling (1943–)

  • Carlos E. J. M. Zarazaga
Reference work entry


Finn Kydland’s contributions to economics science have changed the terms of the debate in two important and related counts: the theory of policymaking and of business cycles. In his Ph.D. dissertation, Finn showed that a complex ‘credibility problem’, inherent to the policymaking process, prevented the evaluation of economic policies with the optimal control theory techniques applied until then. His work with Edward Prescott on business cycles identified supply shocks as one of the primary causes of economic fluctuations, with the counter-intuitive and therefore resisted implication that the perfect smoothing of the business cycle may not be a sensible policy objective.


Assignment problem Bellman’s principle of optimality Business cycles Friedman, M. Keynesianism Kydland, F. Lucas, R. Monetarism Monetary shocks Neoclassical growth theory Norwegian School of Economics and Business Administration Optimal control theory Output-consumption correlation puzzle Phillips curve Prescott, E. Rules vs. discretion System-of-equation approach Targets Technology shocks 

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Carlos E. J. M. Zarazaga
    • 1
  1. 1.