Paul Krugman, who provided early warnings of the current financial market crisis, today was named winner of the Nobel Memorial Prize in Economic Sciences for his pioneering work in the new economic geography, focusing on the location of production factors and economic activity, and in international monetary economics, setting a new standard in the study of currency and economic crisis.
Mr. Krugman, professor of economics and international affairs at Princeton University and also a columnist for The New York Times, was cited by the Nobel committee for the influence of his research on World Trade Organization efforts on trade liberalization, which encourages global investment management, said Bruce I. Jacobs, principal at Jacobs Levy Equity Management. Krugmans research might also suggest the development of large markets diversified across different industries within countries, as wealth accumulates to larger and larger economies; this suggests that larger economies support deep and diversified financial markets that can be exploited by domestic money managers.
This new trade theory affords a better understanding of prevailing trade patterns, which have supplanted the classical paradigm of trading, Mr. Jacobs said.
In the currency area, Mr. Krugman contributed to understanding financial crisis, said Michele Gambera, chief economist at Ibbotson Associates, a unit of Morningstar Inc., Chicago.
His research on economic crisis can be applied directly by investors in what to look for and how to understand if a country is in trouble.
He was one of the early warners of the current financial market crisis, Mr. Gambera said.
Ronald G. Layard-Liesching, chairman of Mountain Pacific Group, said: Mr. Krugman is very widely read as a journalist with provocative and anti-Bush views. The one area of his work which is likely to become very relevant, very fast is currency crises caused by competitive currency devaluation.