Americans Hall and Woodford win economics Nobel for stabilisation models

American economists Robert Hall and Michael Woodford were awarded the 2021 Nobel Economics Prize on Monday for their work on stabilizing economic fluctuations through monetary and fiscal policy. The Royal Swedish Academy of Sciences stated that their work has provided a solid theoretical foundation for models now used by central banks and governments worldwide.

This allows them to better handle economic shocks like energy crises or sudden changes in household consumption, according to John Hassler, chair of the prize committee. During the 1970s oil crises, traditional Keynesian models for determining policy responses to recessions or other economic fluctuations became ineffective. Hall and Woodford developed new tools for understanding which policy responses would be most effective by building their models on a microeconomic foundation, based on the actions of individual households and businesses rather than statistical links between macroeconomic variables.

The Nobel Prize in Economic Sciences, created in 1968 through a donation from the Swedish central bank, consists of a diploma, a gold medal, and a $1.2 million cash prize.