Americans Hall and Woodford win Nobel economics prize for work on stabilisation

Stockholm, October 12 - American economists Robert Hall and Michael Woodford received the Nobel Economics Prize today for their research on stabilizing economic fluctuations through monetary and fiscal policy. The Nobel Committee at the Royal Swedish Academy of Sciences explained that the laureates have established a robust theoretical basis for the models currently employed by central banks and governments worldwide.

According to John Hassler, chair of the prize committee, their work equips us with better tools to handle economic shocks, such as energy crises or sudden shifts in household consumption.

In the 1970s oil crises, conventional Keynesian models, which were widely used to determine when and how to implement measures during recessions or other economic fluctuations, became ineffective. This led Hall and Woodford to develop innovative tools for understanding which policy responses would be most effective. The Nobel jury noted that instead of relying on statistical relationships between macroeconomic variables, like inflation, production, and consumption, the economists opted for a microeconomic foundation.

This approach takes into account the actions of individual households and businesses as a whole to understand their impact on the economy.

The Nobel Prize in Economics is one of the six Nobel Prizes established by Swedish scientist Alfred Nobel in 1895. It was introduced through a donation from the Swedish central bank in 1968, giving rise to the term "a false Nobel" among its detractors. However, like the prizes for Chemistry and Physics, the Royal Swedish Academy of Sciences selects the winner and follows the same rigorous selection process.

Last year, the award was given to American-Israeli Joel Mokyr, France's Philippe Aghion, and Canada's Peter Howitt for their research on technology's role in economic growth. All Nobel laureates receive a diploma, a gold medal, and a $1.2 million prize money.

The laureates will be honored at formal ceremonies on December 10, the anniversary of Swedish scientist Alfred Nobel's death in 1896, who established the Nobel Prizes through his will.