New Delhi, Oct 12: The Royal Swedish Academy of Sciences on Monday awarded the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, or the Nobel in Economics, to American economists Robert E. Hall and Michael Woodford for developing macroeconomic models that have significantly improved policymakers' ability to stabilise economies during periods of boom and recession.
The academy said the laureates' work has provided a stronger theoretical foundation for fiscal and monetary policy, enabling governments and central banks to better manage economic fluctuations through timely policy interventions.
According to the Nobel Committee, Hall of Stanford University and Woodford of Columbia University rebuilt macroeconomic models on microeconomic foundations, focusing on how households and businesses make decisions and collectively influence the wider economy.
Their research emerged amid criticism of traditional Keynesian economic models following the oil shocks of the 1970s, when many advanced economies experienced a combination of high inflation, weak growth and rising unemployment.
The Nobel Committee further noted that the two economists demonstrated how macroeconomic models could be reconstructed to restore confidence in stabilisation policies by incorporating forward-looking behaviour among consumers and businesses.
A key element of their work is the idea that households and firms take future economic conditions into account when making decisions on spending, saving, investment and pricing.
As a result, policy signals from governments and central banks can influence expectations and help steer economic activity.
The academy noted that the models developed by Hall and Woodford have become widely used by central banks and governments around the world and have proved valuable in responding to economic downturns and external shocks.
"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," said John Hassler, Chair of the Committee for the Prize in Economic Sciences.
He added that the models have improved policymakers' ability to respond to disruptions such as energy crises and sudden shifts in household consumption.
Robert E. Hall -- born in 1943 in Palo Alto, California -- earned his PhD from the Massachusetts Institute of Technology in 1967 and is a professor at Stanford University.
On the other hand, Michael Woodford -- born in 1955 in Chicopee, Massachusetts --received his PhD from the Massachusetts Institute of Technology in 1983 and is a professor at Columbia University in New York.
Additionally, the prize carries an award of 12 million Swedish kronor which will be shared equally between the two laureates.
--IANS