Economics Nobel awarded for work on stabilizing economies in crisis

The 2026 Sveriges Riksbank Prize in Economic Sciences has been awarded to economists Robert E. Hall and Michael Woodford for their groundbreaking research on stabilizing economies during periods of crisis. The prize committee describes their work as having "generated a paradigm shift in stabilization policy and [is] now used by central banks and finance ministries around the world".

The awarding committee notes that this recognition is "an excellent prize, honouring two superb and highly influential economists". Economist John Cochrane of Stanford University's Hoover Institution praises the laureates, stating, "I would hate to be the Nobel Prize committee deciding which two or three to recognize". Former International Monetary Fund chief economist Olivier Blanchard agrees, remarking that the laureates "have dramatically changed the conduct of monetary policy".

Hall, who is based at Stanford University in California, demonstrated that people's consumption decisions are influenced not only by rational factors like earnings but also by psychological factors, which he termed "animal spirits" and "expectations about the future". He validated his predictions using real-world data on consumption.

Woodford, based at Columbia University in New York, expanded upon this work to create a New Keynesian microeconomic theory, which was later detailed in his book "Interest and Prices: Foundations of a Theory of Monetary Policy" (Princeton University Press, 2003). The two laureates' contributions, the Nobel committee states, "allow us to obtain a deeper understanding of the sources and propagation mechanisms behind recessions and booms".