Two American economists, Robert E. Hall of Stanford University in California and Michael Woodford of Columbia University in New York, have won the 2026 Nobel Prize in Economic Sciences for their research on the microeconomic foundations of macroeconomic stability.
The Royal Swedish Academy of Sciences announced the award on Monday, October 12, saying the laureates developed macroeconomic models that significantly improved the ability of governments and central banks to implement effective stabilisation policies.
Their research provides a framework for using timely fiscal and monetary measures to manage economic fluctuations and maintain stability. The models emphasise how households and businesses make decisions about saving, consumption and pricing based on their expectations of future economic conditions.
Economic activity typically moves through cycles of expansion and recession, making stabilisation policies essential to limiting downturns and controlling inflation. Such policies have played a central role in economic management since the emergence of Keynesian economics in the early 20th century.
However, the oil crises of the 1970s exposed limitations in traditional Keynesian models, as many Western economies experienced a combination of sluggish growth, high unemployment and soaring inflation.
Hall and Woodford helped reshape macroeconomic analysis by incorporating the decisions of individuals and firms into broader economic models, moving beyond a reliance on aggregate indicators such as inflation, output and consumption.
Their work has strengthened the theoretical basis for designing policies that respond to economic shocks, including energy crises and sudden declines in consumer spending.
John Hassler, chairman of the prize committee, said the laureates had provided a stable theoretical foundation that central banks and governments around the world use in economic policymaking.
The research, he added, has helped policymakers become better equipped to respond to unexpected disruptions and reduce economic instability.
The award, formally known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, recognises outstanding contributions to economic research.
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