Kathmandu, October 12
American economists Robert Hall and Michael Woodford won the Nobel economics prize on Monday for their work on how monetary and fiscal policies can help stabilise economic fluctuations.
“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,” the Royal Swedish Academy of Sciences said in a statement.
The work provides tools to help policymakers respond to economic shocks, including energy crises and sudden changes in household consumption, said John Hassler, chair of the prize committee.
During the oil crises of the 1970s, existing Keynesian models, which had long guided decisions on when and how to tackle recessions and other economic fluctuations, proved inadequate. Hall and Woodford responded by developing new approaches to identify more effective policy measures.
Rather than relying on statistical relationships between macroeconomic variables such as inflation, production and consumption, the economists built their models on microeconomic foundations, according to the academy.
This approach examines how the collective decisions of individual households and businesses shape the broader economy.
The economics prize is the only Nobel award not included among the original five established under the will of Swedish scientist Alfred Nobel, who died in 1896. It was created in 1968 following a donation from Sweden’s central bank, prompting some critics to call it a “false Nobel”.
However, the Royal Swedish Academy of Sciences selects the economics laureates through the same process used for the Nobel prizes in physics and chemistry.
Last year, the award went to American-Israeli economist Joel Mokyr, French economist Philippe Aghion and Canadian economist Peter Howitt for their research into how technological advances drive economic growth.
Like the other Nobel prizes, the economics award includes a diploma, a gold medal and prize money of $1.2 million.
The laureates will receive their awards at formal ceremonies on December 10, the anniversary of Nobel’s death.
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