Hall and Woodford Win 2026 Nobel in Economics for Stabilisation Models

The Royal Swedish Academy of Sciences awarded the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Robert E. Hall and Michael Woodford for their work on the microeconomic foundations of macroeconomic stabilisation.

Hall, a professor at Stanford University, and Woodford, a professor at Columbia University, developed models that incorporate how individual households and firms make forward-looking decisions about spending, saving and pricing. These models replaced earlier approaches that relied mainly on statistical relationships between aggregate variables such as inflation and output.

The academy said the laureates’ work has given central banks and finance ministries a stable theoretical foundation for policy. New Keynesian models that grew from their research are now used worldwide to judge when and how much to stimulate or cool an economy. John Hassler, chair of the prize committee, said the models help policymakers handle shocks such as energy crises or sudden changes in household consumption.

Hall was born in 1943 in Palo Alto, California, and received his PhD from MIT in 1967. Woodford was born in 1955 in Chicopee, Massachusetts, and received his PhD from MIT in 1983. They will share the prize of 12 million Swedish kronor equally.

Woodford spoke by phone from New York and called the award a tremendous honour and a surprise. The prize is the final Nobel of 2026 and is funded by Sweden’s central bank rather than the original Nobel foundation. Previous winners in the field include economists whose models also shaped responses to the 2008 financial crisis and the pandemic.

The models emphasise that expectations matter. When central banks communicate future policy paths clearly, households and firms adjust behaviour in ways that can stabilise the economy. Concepts such as sticky prices and forward guidance, now standard in policy analysis, draw on this body of work.

The academy noted that the research has been useful during recent energy shocks and inflation surges. Central banks including the Federal Reserve and the European Central Bank have cited similar frameworks in their public communications and internal models.