American economists Robert E Hall and Michael Woodford have won the 2026 Nobel economics prize for their research into how monetary and fiscal policies can help stabilise economic fluctuations.
The pair were recognised “for microeconomic foundations of macroeconomic stabilisation”, according to the jury at the Royal Swedish Academy of Sciences, which announced the award on Monday.
“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,” the jury said in a statement.
John Hassler, chair of the prize committee, said the economists’ work had improved the ability of policymakers to respond to economic disruptions.
“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,” he said.
During the oil crises of the 1970s, existing Keynesian models, which had long been used to determine when and how to implement measures to address recessions and other economic fluctuations, proved inadequate.
This prompted Hall and Woodford to develop new tools for understanding which policy responses would be most effective.
“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,” the academy jury said.
“This encompasses an understanding for how the total mass of individual households and businesses affect the economy through their actions.”
The economics prize is the only Nobel award that was not among the original five established in the will of Swedish scientist Alfred Nobel, who died in 1896.
Instead, the prize was established through a donation from Sweden’s central bank in 1968, prompting critics to describe it as “a false Nobel”.
However, like the Nobel prizes in chemistry and physics, the Royal Swedish Academy of Sciences selects the winner and follows the same selection process.
Last year, the award went to American-Israeli economist Joel Mokyr, France’s Philippe Aghion and Canada’s Peter Howitt for their research into how technology drives and influences economic growth.
Like the other Nobel prizes, the economics award consists of a diploma, a gold medal and a $1.2 million cheque.
The laureates will receive their awards at formal ceremonies on December 10, the anniversary of Alfred Nobel’s death in 1896. The Swedish scientist established the prizes in his will.