Photo: Collected
Robert E. Hall and Michael Woodford, two professors from the United States, have won the 2026 Nobel Prize in Economics.
They have been honoured in recognition of their role in developing the New Keynesian economic model.
Their research helps governments and central banks set policy so that the impact of external shocks on the economy can be managed and stability maintained.
The Royal Swedish Academy of Sciences announced the prize in the Swedish capital Stockholm on Monday.
‘The laureates have helped us smooth out the ups and downs of the economy,’ the academy said in a statement.
Why the research matters for a stable economy
The core significance of Hall and Woodford’s work lies in showing what role the decisions of individuals and firms play in explaining the overall picture of the economy, such as fluctuations in output, inflation, employment and consumption. By linking these factors on the basis of economic models, it enables policymakers to take more effective measures in times of crisis.
The New Keynesian economic model is an important framework in modern macroeconomics. Such models are used to analyse how central banks, by setting interest rates, and governments, by formulating fiscal policy, can soften the impact of recessions, inflation or other shocks.
Woodford’s research in particular highlighted the importance of central bank monetary policy and of forward guidance on future policy decisions.
Economics not among Nobel’s original prizes
The official name of the economics Nobel is ‘The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel’. The prize was not mentioned in Alfred Nobel’s original will. Sweden’s central bank introduced it in 1968, and it was first awarded the following year. However, like the other Nobel prizes, it is announced by Sweden’s Royal Swedish Academy of Sciences.
This year’s prize carries 12 million Swedish kronor, which the two laureates, Hall and Woodford, will share between them. Source: CNN, The Guardian, Nobel Prize
