On December 10, 2003,
UCSD economics professors emeriti Clive Granger and Robert Engle
accepted the Nobel Prize for economics
at a ceremony in Stockholm, Sweden.
The Nobel committee cited
Granger’s and Engle’s pioneering
contributions to econometrics, explaining that they devised “new
statistical methods for dealing with two key properties of many
economic time series: time-varying volatility and nonstationary.” Time
series are the chronological sequences of observations, used
when estimating relationships and testing economic hypotheses.
Their work has great practical application in understanding the
development of GDP, prices, interest rates and stock prices,
and has changed the way economists relate financial data to broad
economic trends.
While collaborating on one another’s projects,
they pursued their own separate interests. “Rob (Engle) works
mostly in the finance area,” Granger said, “and I more
in macroeconomics.”
Granger worked on economic forecasting
that can be used by the Federal Reserve and central banks. “If
you’re trying
to figure out if interest rates cause unemployment or if unemployment
causes interest rates, you go to the Granger causality technique,” said
Ross Starr, a professor of economics at UCSD.
Engle’s major
breakthrough was in the use of autoregressive conditional heteroskedasticity
(ARCH). Engle’s ARCH models
have become indispensable tools for financial analysts, who use
them in pricing assets and evaluating portfolio risk.
Robert
Dynes, UC president and former UCSD chancellor said, “Their
research clearly has had real-world applications and again illustrates
how UC’s discoveries and innovations help us to better
understand our world.”
One of their former students, Mark
Watson, Ph.D. ’80, now
a professor of economics at Princeton University, remembers their
cutting-edge classes on econometrics but also recalls that it
was not all work and no play. Granger apparently loved to go
down to the beach in the afternoons and go boogey boarding, and
Engle would sometimes lighten the burden of statistics classes
by reciting poetry.
Both Engle and Granger retired from UCSD
last June, but they remain professors emeriti. The cash award
of approximately $1.3
million will be shared equally between the two laureates. |
