Hall, Woodford win Nobel prize for work on how to stabilise economies

The 2026 Nobel Economics Prize was awarded to US economists Robert E. Hall and Michael Woodford for their groundbreaking research on managing economic shocks. The prize, officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, recognizes their work in understanding how financial decisions made by households and businesses impact the overall economy. Hall and Woodford will share a prize fund of 12 million Swedish kronor, equivalent to about $1.2 million.

Their research has significantly enhanced the ability of governments and central banks to implement effective policies for stabilizing the economy. By explaining how changes in household and business behavior can ripple through the broader economy, their models provide policymakers with a strong theoretical foundation. These models help central banks and governments make informed decisions about when and how to respond to economic disruptions using monetary and fiscal policies.

Economic shocks, such as energy crises or unexpected changes in household spending, can cause sudden disruptions to normal economic activity. Examples include the recent spike in energy prices or abrupt shifts in consumer behavior. Hall and Woodford's research equips policymakers with a better understanding of these disruptions and guides the development of appropriate policy responses.

Monetary policy involves central bank actions to control interest rates and borrowing. Fiscal policy refers to government decisions on spending and taxation. Hall and Woodford's work helps policymakers comprehend how these policy tools influence the economy. For instance, adjusting interest rates can impact borrowing and spending, while government spending or tax changes can support economic activity during downturns or manage demand when the economy faces excessive pressure.

Robert Hall, born in California, is a professor at Stanford University. His collaboration with Woodford has significantly contributed to economic models that assist policymakers in navigating economic uncertainties. Michael Woodford, an American economist born in Massachusetts, is a professor at Columbia University. Together, they share the 2026 prize for their pioneering work in economic stability policies.

This recognition follows a trend where most previous Nobel laureates in economics have been from the United States, with only three women having received the award. Recent laureates, such as Claudia Goldin in 2023, have focused on gender's influence on pay and employment. The Institute for Scientific Information identified researchers in monetary policy, the economics of information technology, and evolutionary economic theory as potential 2026 prize recipients.

Joel Mokyr, Philippe Aghion, and Peter Howitt won the 2025 prize for their work on "creative destruction," examining how new technologies and production methods drive economic growth and improve living standards.