Robert E. Hall and Michael Woodford win 2026 Nobel Prize in Economics for microeconomic foundations of macroeconomic stabilisation

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 on 12 October for their work on the microeconomic foundations of macroeconomic stabilisation. The prize is worth 12 million Swedish kronor, shared equally.

Hall, born in 1943 in Palo Alto, California, is a professor at Stanford University and senior fellow at the Hoover Institution. Woodford, born in 1955 in Chicopee, Massachusetts, is a professor at Columbia University. Both hold PhDs from MIT.

Their research rebuilt macroeconomic models from the decisions of individual households and businesses rather than statistical links between aggregate variables such as inflation, output and consumption. Households and firms are forward-looking. They decide how much to save or spend, and how to set prices, based on expectations of future policy. Governments and central banks can influence those expectations through clear communication and credible plans.

John Hassler, chair of the Committee for the Prize in Economic Sciences, said the work provides a stable theoretical foundation for the models now used by central banks and finance ministries. The models help policymakers respond to shocks such as energy crises or sudden shifts in household spending. The committee noted the models proved useful during the pandemic and recent energy crises.

Hall showed the importance of forward-looking households for economic modelling. Woodford developed a unified framework that incorporated these ideas for policy use. His work explained how current and expected future interest rates affect the economy and why clear communication helps control inflation. The models include concepts such as sticky prices, where price changes lag shifts in demand.

The Academy said the laureates helped smooth the economy’s peaks and troughs. Well-timed fiscal and monetary measures, based on these models, can reduce the size of downturns and inflation spikes. Central banks have used similar frameworks after the 2022 inflation surge and in response to later energy shocks.

Woodford told the committee by phone from New York that the award was a tremendous honour and a surprise. Stanford President Jonathan Levin said Hall’s insights changed how governments and central banks respond to volatility. Hoover Institution colleagues described the recognition as well deserved for work that has shaped policy thinking about free-market economies.

The economics prize is the last of the 2026 awards. It was established by Sweden’s central bank in 1968 and first given in 1969. It is not one of the original prizes created in Alfred Nobel’s 1895 will. The Royal Swedish Academy of Sciences selects the laureates.

The models do not eliminate economic fluctuations. They give policymakers a clearer map of how micro-level choices aggregate into macro outcomes and how policy announcements can steer those choices. That map has become standard equipment at major central banks.