Nobel Prize in Economics announced! Unlocking the key to central bank stabilization of the economy, two American scholars win awards

The 2026 Nobel Prize in Economics winners Robert E. Hall (left) and Michael Woodford (right). The Royal Swedish Academy of Sciences commended the two for incorporating the decision-making of households and businesses into economic models, laying the foundation for individual economics in analyzing the central bank's policies to stabilize the economy. (Taken from the official website of the Nobel Prize)

The 2026 Nobel Prize in Economic Sciences will be jointly won by American economists Robert E. Hall and Michael Woodford. The Royal Swedish Academy of Sciences commended two people for "laying the individual economic foundation for overall economic stabilization policies" and recognized them for incorporating household and corporate decision-making into economic models, allowing the government and central bank to more specifically analyze how policies affect the economy.

The official eulogy for the Nobel Prize points out that economic prosperity ebbs and flows between recessions and growth. If the government and central bank can stimulate or slow down the economy at the right time, it can help maintain stability and avoid a recession that lasts too long or inflation that gets out of control. Hall and Woodford's research contributed to an important shift in stabilization policy analysis. The related New Keynesian models can be used to explain and quantify the impact of policies on business cycles, and are currently used by central banks and fiscal departments around the world.

Understanding the economy through the decisions of households and businesses

In the past, overall economic models often analyzed the economy from the statistical relationship between overall data such as inflation, output, and consumption. Hall and Woodford extended the basis of analysis to the individual economy, considering how households and businesses make decisions and how these actions jointly affect the overall economy.

This research is related to an economic situation familiar to the public. For example, after the central bank adjusts interest rates, households may reconsider their mortgage burden and consumption arrangements, and companies may also adjust their investment or production plans. These individual decisions interact to affect overall economic activity. Incorporating the behavior of households and businesses into the model helps analyze how policies are transmitted to the economy, rather than just observing changes in figures such as inflation and output.

The official name of the Economics Prize is the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel". It is not an award listed in Nobel's original will, but was established by the Swedish Central Bank in memory of Nobel. It was first awarded in 1969 and the winner is selected by the Royal Swedish Academy of Sciences.