American economists Robert E. Hall and Michael Woodford have jointly received the 2026 Nobel Memorial Prize in Economic Sciences for research into the microeconomic foundations of macroeconomic stabilization, according to the announcement cited by the BBC’s Russian Service.
The economists’ work examines how decisions made by individual households and businesses influence the economy as a whole, helping explain economic fluctuations and how governments and central banks can respond to them.
According to the BBC’s Russian Service, the research shows how economic models can be built not only on statistical relationships between inflation, output and consumption, but also on the decisions and expectations of consumers and companies.
“The laureates’ work provided a solid theoretical foundation for the models used today by central banks and governments around the world. Thanks to this research, we are better prepared for economic shocks such as energy crises and sharp changes in consumer behavior,” said John Hassler, chairman of the Economic Sciences Prize Committee, according to the report.
How the research helps explain economic fluctuations
Economic activity typically moves through periods of growth and downturn. Since the work of British economist John Maynard Keynes, economists have sought to understand how governments can reduce these fluctuations and stabilize the economy.
During recessions, authorities traditionally stimulate economic activity by lowering interest rates and increasing government spending, sometimes through additional borrowing. During periods of rapid growth, they may tighten monetary and fiscal policy to prevent the economy from overheating.
However, the oil crises of the 1970s exposed weaknesses in existing economic models. According to the Swedish Academy’s explanation cited in the report, Keynesian approaches failed to adequately address rising unemployment and inflation, contributing to a period of slow growth and high inflation in Western economies.
Hall and Woodford’s research emphasizes the importance of understanding how individuals and businesses make decisions based on their expectations of the future. Consumers determine how much to spend, while companies decide how much to invest. These decisions, in turn, influence economic activity.
The research also highlights the role of government communication. By clearly explaining their future policy plans, authorities can influence public expectations and, consequently, economic decisions.
Hall is a professor at Stanford University known for his research on economic fluctuations and labor markets.
Woodford is a professor at Columbia University whose work focuses on monetary policy, forward guidance and economic stabilization.
About the economics prize
Officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the award was established in 1968 by Sweden’s central bank, Sveriges Riksbank, to mark its 300th anniversary.
Although it was not among the five original Nobel Prizes established under Alfred Nobel’s will, it is administered within the Nobel Prize framework. The Royal Swedish Academy of Sciences selects the laureates, who are announced alongside recipients of the other Nobel Prizes.
The first Prize in Economic Sciences was awarded in 1969 to Dutch economist Jan Tinbergen and Norwegian economist Ragnar Frisch for developing and applying dynamic models to analyze economic processes.