Robert Hall, Michael Woodford win 2026 Nobel economics prize for models guiding monetary, fiscal policy

US economists Robert E. Hall and Michael Woodford won the 2026 Nobel economics prize on Monday for developing macroeconomic models that have improved governments' and central banks' ability to stabilise economies through monetary and fiscal policy.

The Royal Swedish Academy of Sciences awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Hall, a professor at Stanford University, and Woodford, a professor at Columbia University, for their work on the "microeconomic foundations of macroeconomic stabilisation".

The economists helped rebuild stabilisation policy after the economic turbulence of the 1970s, when traditional Keynesian models struggled to address high inflation and unemployment alongside sluggish economic growth.

Keynesian approaches generally advocate cutting interest rates and increasing government spending during downturns, while tightening policy during periods of excessive economic growth.

However, the oil crises of the 1970s exposed shortcomings in the models used to determine when and how such measures should be implemented.

Hall and Woodford helped revitalise the approach by grounding macroeconomic models in the decisions of individual households and businesses, rather than relying primarily on statistical relationships between variables such as inflation, output and consumption.

According to the Nobel committee, a central component of their work is that households and businesses make forward-looking decisions about savings, consumption and prices.

By communicating their policy intentions, governments and central banks can influence expectations and steer economic activity, the academy said.

"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.

The models have strengthened policymakers' ability to respond to economic shocks and reduce fluctuations in output and employment, the academy said.

The prize carries an award of 12 million Swedish kronor, to be shared equally between the two laureates.

Hall, born in 1943 in Palo Alto, California, received his PhD from the Massachusetts Institute of Technology in 1967.

Woodford, born in 1955 in Chicopee, Massachusetts, received his PhD from MIT in 1983.