New Delhi, October 12: Research into how households, businesses and policymakers respond to changing economic conditions has earned American economists Robert E. Hall and Michael Woodford the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, recognising their work on macroeconomic models designed to help governments and central banks manage economic booms, recessions and external shocks.
The Royal Swedish Academy of Sciences announced the award on Monday, citing the economists’ contribution to the theoretical foundations of fiscal and monetary policy. Their research has helped explain how policy decisions can influence economic activity by accounting for the expectations and choices of households and businesses.
Hall, a professor at Stanford University, and Woodford, a professor at Columbia University, developed macroeconomic models grounded in microeconomics. Their approach examines how individual decisions on spending, saving, investment and pricing combine to shape broader economic trends.
Their work emerged against a backdrop of criticism of traditional Keynesian models following the oil shocks of the 1970s. Several advanced economies at the time faced high inflation alongside weak economic growth and rising unemployment, creating challenges for policymakers seeking to stabilise their economies.
The Nobel Committee said the economists showed how macroeconomic models could incorporate forward-looking behaviour by consumers and firms, helping restore confidence in the theoretical basis for stabilisation policies. Their framework accounts for the way people and businesses factor expected future economic conditions into present-day decisions.
This approach also highlights how signals from governments and central banks can shape expectations and influence economic activity. Policymakers can use such models to assess how interventions may affect spending, investment and prices as economic conditions change.
According to the academy, models developed by the two economists are now widely used by central banks and governments internationally. The research has proved useful in examining responses to economic downturns and external disruptions, including energy crises and sudden changes in household consumption.
John Hassler, chair of the Committee for the Prize in Economic Sciences, said the laureates had established a stable theoretical foundation for models used by governments and central banks. He also highlighted their relevance to policymaking during periods of economic disruption.
Hall was born in 1943 in Palo Alto, California, and received his doctorate from the Massachusetts Institute of Technology in 1967. Woodford was born in 1955 in Chicopee, Massachusetts, and earned his doctorate from the same institution in 1983.
The prize carries an award of 12 million Swedish kronor, which will be divided equally between the two economists.
