The Nobel Prize in economics was on Monday awarded to American economists Robert Hall and Michael Woodford for stabilisation models.
Hall and Woodford developed new macroeconomic models that have “significantly improved our ability to implement effective stabilisation policy”, the Royal Swedish Academy of Sciences said.
A stabilisation policy is a set of macroeconomic measures that governments and central banks take to stabilise the business cycle, maintain employment levels and keep inflation under control.
Fiscal and monetary policy measures based on these models “can reduce the economy’s peaks and troughs”, the academy said.
Hall and Woodford were awarded the prize for “demonstrating how economic models could be reconstructed to revitalise stabilisation policy”, it added.
“Rather than basing the models on statistical links between macroeconomic variables, such as inflation, production and consumption, they chose to build them on a microeconomic foundation,” said the academy. “This encompasses an understanding for how the total mass of individual households and businesses affect the economy through their actions.”
The two economists will equally share the prize amount of 12 million Swedish kronor, or Rs 11.4 crore.
The prize in economics was the last to be announced this year.
On October 5, the prize in medicine was awarded to three scientists – Peter Hegemann, Georg Nagel and Karl Deisseroth – for their research on brain activity....