Finn Kydland is a Professor of Economics at the University of California, Santa Barbara. He is a citizen of Norway. He earned his B.S. from the Norwegian School of Economics and Business in 1968 and his Ph.D. from Carnegie Mellon University in 1973.

Finn Kydland was awarded the 2004 Nobel Prize in Economics with Edward Prescott "for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles". Kydland and Prescott have made significant contributions not only in macroeconomic analysis, but also in the practice of monetary and fiscal policy in many countries. In their seminal paper of 1982 “Time to Build and Aggregate Fluctuations” they developed a model where technological shocks underlie business cycles. This paper led to the development of a large number of Real Business Cycle (RBC) models with emphasis on the role of real shocks, particularly technology shocks, in driving business fluctuations. But RBC models also became a point of departure for many theories in which technology shocks do not play a central role.

The RBC model predicts that given a temporary positive shock (examples of such shocks include innovations, weather, oil prices, regulations, etc.), output, consumption, investment and labor rise above their long-term trends and hence formulate into a positive deviation. Furthermore, since more investment means more capital is available for the future, a short-lived shock may have an impact in the future. That is, above-trend behavior may persist for some time even after the shock disappears. This capital accumulation is often referred to as an internal “propagation mechanism”, since it may increase the persistence of shocks to output.

RBC-based models came to be widely used as laboratories for policy analysis in general and for the study of optimal fiscal and monetary policy in particular.

http://www.nobelprize.org/nobel_prizes/economics/laureates/2004/kydland-autobio.html#

http://www.ucsb.edu/nobel/kydland.shtml