Hall and Woodford win 2026 Nobel in Economics for stabilisation models

Robert E. Hall of Stanford University and Michael Woodford of Columbia University received the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel on 12 October. The Royal Swedish Academy of Sciences cited their contributions to the microeconomic foundations of macroeconomic stabilisation.

“The laureates have helped us smooth out the economy’s peaks and troughs,” the Academy said. Their models are used by central banks and finance ministries to judge the timing and scale of fiscal and monetary responses to shocks. The prize is worth 12 million Swedish kronor, about 1.2 million dollars, shared between the two.

Hall, born in 1943 in Palo Alto, is the Robert and Carole McNeil Joint Hoover Senior Fellow and Professor of Economics at Stanford. Woodford, born in 1955 in Chicopee, Massachusetts, is a professor at Columbia. Woodford called the award “a tremendous honour” and “a surprise” when reached in New York. Hall’s 1978 work emphasised that households prefer smooth consumption and look forward when deciding how much to save or spend. Woodford later assembled a unified New Keynesian model that incorporated sticky prices and the role of expected future interest rates.

The committee noted that earlier Keynesian approaches had struggled to explain the 1970s oil shocks. Hall and Woodford rebuilt the framework from the decisions of individual households and firms rather than from aggregate statistical relationships alone. John Hassler, chair of the prize committee, said the work “provided us with a stable theoretical foundation for the models that are now used by central banks and governments around the world.”

The models highlight why clear communication of future policy paths matters. Households and firms adjust spending and pricing when they revise their expectations of tomorrow’s interest rates or fiscal stance. Central banks have used versions of these frameworks to respond to the post-pandemic inflation surge and the more recent energy-price shock. The Academy observed that the same tools help policymakers distinguish temporary supply disruptions from shifts in underlying demand.

Timo Boppart of Stockholm University, a member of the committee, summarised the division of labour: Hall worked mainly on the demand side through consumption, while Woodford examined firm price-setting and combined the pieces. The result is a set of equations that let officials estimate how large a rate cut or spending increase is needed to offset a given shock without simply extrapolating from past cycles.

The award arrives while several major economies are still calibrating responses to elevated energy prices and uneven recovery. The models do not prescribe a single policy; they supply a consistent way to evaluate the effects of different choices on inflation, output and employment once the forward-looking behaviour of agents is taken into account. That is the concrete addition the prize recognises.

Place: Stockholm. Date: 12 October 2026.