Two UC San Diego scholars were awarded the Nobel Prize in economics Wednesday, bringing the number of Nobel laureates in the history of the University of California to 45.
Clive Granger, 69, and Robert Engle, 60, became the 14th and 15th UCSD laureates when the Royal Swedish Academy of Science announced its selections. The pair was recognized for their work in the field of time-series econometrics, the statistical analysis of economic data that accrues over long periods of time.
The Nobel Prize website cites Engle “for methods of analyzing economic time series with time-varying volatility (ARCH).” The ARCH class of economic models, which Engle introduced in 1982, predict both where an economic variable is headed and how likely it is to deviate from that target. Today the models drive many computer calculations that financial analysts use to quantify the risk and value of a variety of financial options.
Granger is cited “for methods of analyzing economic time series with common trends (cointegration).” He jointly introduced the concept of cointegration with Engle in 1987. The concept has helped economists understand how certain economic relations may be stable and highly predictable over time, even though a forecast of any individual component of the relation may deteriorate the further in advance one tries to predict.
“Government and business leaders and economists are in a better position to interpret economic information – and forecast where the economy is headed – as a result of the pioneering research conducted by Professor Granger and Professor Engle,” UC President Robert Dynes said in a statement.
Both men retired from the UCSD faculty in June 2003. Granger, who joined the UCSD faculty in 1974, is currently a visiting scholar at the University of Canterbury in New Zealand. Engle, who came to UCSD in 1977 and served as chair of the Economics Dept. from 1990-94, is currently a visiting scholar at New York University.
“I was awakened here in the middle of the night, so I didn’t get a great night’s sleep,” Granger said. “I was mildly surprised because we knew that this was under consideration for the last several years. Of course, one is always surprised when it actually happens, and, in any event, I am delighted and honored.”
Granger characterized the two men’s work as separate but collaborative.
“We both worked on each other’s projects but we also had our separate ideas,” Granger said. “He published papers jointly with me on my ideas and I published with him, but most of the work was individual with our own students. Rob works mostly in the finance area and I more in macroeconomics. We were not competitors, but were helpful colleagues.”
Granger graduated from the University of Nottingham in 1955 and received his Ph.D. there in 1959. Engle graduated from Williams College in 1964 and received his Ph.D. from Cornell University in 1969.
“Concerning my work, I can say that economic data has special properties and it requires special techniques,” Granger said. “I have developed techniques that can be used by central banks and federal reserves for forecasting and policy development. I’m always hoping to make my research practical and useful. It starts out as theory, but then one aims to move toward the practical end of things.”