American economists Robert E Hall and Michael Woodford received the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel on Monday for developing macroeconomic models that have improved policymakers’ ability to stabilise economies during booms and recessions.
The Royal Swedish Academy of Sciences said their research established a stronger theoretical foundation for fiscal and monetary policies. These models help governments and central banks manage economic fluctuations through timely interventions.
According to the Nobel Committee, Hall of Stanford University and Woodford of Columbia University rebuilt macroeconomic models around microeconomic foundations.
Their work examined how households and businesses make decisions and how those choices influence the wider economy.
Their research gained significance after the oil shocks of the 1970s, when several advanced economies faced high inflation, weak growth and rising unemployment. These developments fuelled criticism of traditional Keynesian economic models.
The economists demonstrated how models incorporating forward-looking behaviour could restore confidence in stabilisation policies.
Models Help Policymakers Respond to Shocks
The academy said governments and central banks worldwide widely use these models to respond to downturns and external disruptions.
“The Laureates’ work has provided us with a stable theoretical foundation for the models that are now used by central banks and governments around the world,” said John Hassler, Chair of the Committee for the Prize in Economic Sciences.
He added that the models had strengthened responses to energy crises and sudden changes in household consumption.
Hall, born in 1943 in Palo Alto, California, earned his PhD from the Massachusetts Institute of Technology in 1967. He is a professor at Stanford University.
Woodford, born in 1955 in Chicopee, Massachusetts, earned his PhD from the same institution in 1983. He is a professor at Columbia University in New York.
The prize carries an award of 12 million Swedish kronor, which the two laureates will share equally.
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