Two Americans win Nobel Prize for groundbreaking models to tackle economic downturns

American economists Robert E. Hall and Michael Woodford have been jointly awarded the 2026 Nobel Memorial Prize in Economic Sciences for their groundbreaking work on the microeconomic foundations of macroeconomic stabilization. The Royal Swedish Academy of Sciences announced the laureates on Monday, October 12, recognizing their contributions to understanding how monetary policy influences the economy and providing new models to help central banks and governments manage economic shocks and promote stability.

Hall, affiliated with Stanford University, and Woodford, from Columbia University, were honored for developing models that connect individual household and business decisions to broader economic factors such as inflation and unemployment. Their research has provided a stable theoretical framework for policies that aim to smooth out economic fluctuations, helping to address issues like energy crises and sudden shifts in consumer behavior.

The laureates' work is considered a paradigm shift in stabilization policy, with their New Keynesian models now widely used by central banks and finance ministries globally to analyze how policy affects business cycles. The prize, formally known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, carries a cash award of 12 million Swedish kronor.