American economists Robert E. Hall and Michael Woodford have won the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their work on the microeconomic foundations of economic stabilisation.
The Royal Swedish Academy of Sciences announced the award on Monday, October 12, 2026, saying the economists were honoured “for microeconomic foundations of macroeconomic stabilisation”.
According to the academy, Hall and Woodford developed new macroeconomic models that have significantly improved the ability of governments and central banks to implement effective policies to stabilise the economy.
The academy said the models could help policymakers reduce economic fluctuations through well-timed fiscal and monetary measures.
“The laureates have helped us smooth out the economy’s peaks and troughs,” the academy said in its announcement.
Economic activity typically moves through periods of expansion and contraction. During recessions, governments and central banks may seek to stimulate activity by lowering interest rates and increasing budget deficits, while measures to cool an overheating economy may be used during periods of rapid growth.
However, the academy explained that the economic crises of the 1970s exposed weaknesses in the Keynesian models then used to guide stabilisation policies. Efforts to tackle unemployment were accompanied by uncontrolled inflation, while many Western economies experienced low growth, high unemployment and high inflation.
Hall and Woodford were recognised for helping reconstruct economic models by grounding them in microeconomic principles, focusing on how individual households and businesses make decisions and how those decisions influence the wider economy.
Rather than relying primarily on statistical relationships between broad economic variables such as inflation, production and consumption, their approach examines the behaviour of households and businesses and how their choices shape economic outcomes.
A key element of the models is that households and businesses are forward-looking when making decisions about savings, spending and prices.
The academy said government and central bank communication about future economic policies could influence expectations and help guide economic activity.
John Hassler, chair of the Committee for the Prize in Economic Sciences, said the economists’ work had provided a theoretical basis for models used by policymakers around the world.
“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. With them, we are better equipped to deal with shocks in the economy, such as energy crises or sudden changes in how much households consume,” Hassler said.
The academy added that the models had proved useful in responding to economic downturns and in helping governments and central banks assess how policy decisions could affect the economy.
Hall was born in 1943 in Palo Alto, California, United States. He obtained his PhD from the Massachusetts Institute of Technology in Cambridge, Massachusetts, in 1967 and is a professor at Stanford University in California.
Woodford was born in 1955 in Chicopee, Massachusetts, United States. He received his PhD from the Massachusetts Institute of Technology in 1983 and is a professor at Columbia University in New York.
The award is formally known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.