Hall and Woodford Win Nobel for Models That Guide Stabilisation Policy

The Royal Swedish Academy of Sciences awarded the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Robert E. Hall of Stanford University and Michael Woodford of Columbia University. The citation reads “for microeconomic foundations of macroeconomic stabilisation.” The prize of 12 million Swedish kronor, roughly 1.2 million dollars, will be shared equally. The announcement was made in Stockholm on Monday 12 October.

Hall, born in 1943 in Palo Alto, California, received his PhD from MIT in 1967. Woodford, born in 1955 in Chicopee, Massachusetts, received his PhD from MIT in 1983. Their separate contributions created the theoretical base for models that central banks and finance ministries now use to decide when and how much to tighten or loosen policy. John Hassler, chair of the prize committee, said the work has provided a stable foundation for the models employed around the world.

Hall’s research examined how households make forward-looking decisions about consumption and saving. His 1978 paper showed that consumers prefer smooth consumption paths and that expectations about future income shape current spending. Woodford developed the New Keynesian framework that incorporates sticky prices and the price-setting behaviour of firms. His 2003 book presented a complete model built on microeconomic foundations rather than statistical relationships between aggregate variables such as inflation and output.

The academy said the pair generated a shift in stabilisation policy. Earlier Keynesian approaches relied on top-down statistical links. Hall and Woodford grounded the analysis in the millions of decisions made by households and firms. The resulting models help policymakers quantify how interest-rate changes or fiscal measures affect business cycles. They have been used during the pandemic recovery and the energy-price shocks that followed the 2026 Iran war.

Woodford spoke to the committee by phone from New York and called the award a tremendous honour and a surprise. He was scheduled to set an exam for his students on the morning of the announcement. Hall has not made an immediate public statement. Both economists have advised governments and central banks. Their framework underpins concepts such as forward guidance on the future path of policy and the analysis of sticky inflation when price adjustments lag demand shifts.

The economics prize, established by Sweden’s central bank in 1969, is not one of the original Nobel awards. It is the last to be announced each year. Previous recipients have included work on growth, auctions, labour markets and climate. Hassler noted that the models allow better management of major macroeconomic crises than earlier approaches. The committee emphasised that the research does not prescribe specific policies but supplies the tools to evaluate them.

Hall is the Robert and Carole McNeil Joint Hoover Senior Fellow and Professor of Economics at Stanford. He served as president of the American Economic Association in 2010. Woodford is the John Bates Clark Professor of Political Economy at Columbia. He served on the AEA executive committee from 2011 to 2013. Their joint recognition highlights the long collaboration between micro and macro approaches that now defines much of modern monetary and fiscal analysis.