After the interest rate hike, mortgage loans became heavier and prices rose again! What does the Nobel Prize in Economics research have to do with you?

How families arrange their spending and how companies decide whether to invest may affect the overall prosperity. The research of Hall and Woodford, winners of the 2026 Nobel Prize in Economics, integrates the decisions of households and businesses into economic models and analyzes how these choices affect economic changes; situational photos.

I have to pay a mortgage every month, and going to the market to buy groceries feels increasingly expensive, but my salary has not increased much. What do these changes in life have to do with the overall prosperity? The 2026 Nobel Prize in Economic Sciences will be awarded to American economists Hall and Woodford for their research on how the decisions of households and businesses affect the overall economy, and the impact of government and central bank policies.

If mortgage interest rates rise, some borrowers will have to pay more every month. The budget originally planned to buy appliances and take the family out to eat may have to be saved first. If many families reduce their spending, businesses may also be affected, and companies may then slow down investment or recruitment.

When interest rates decrease, the situation may also be reversed, but it does not mean that everyone will definitely spend more. Some people are worried about job instability and would rather save their money; some companies, even if it is cheaper to borrow money, may not dare to expand their operations because of insufficient orders. There are many factors that affect the economy, and interest rates are just one of them.

How decisions by households and businesses affect the economy

Hall and Woodford's research incorporates how households and businesses make decisions into economic models. When analyzing the overall economy, economists look at figures such as inflation, consumption and production; their research starts from the behavior of households and businesses and analyzes how these decisions affect the overall economy.

For example, people are worried about unstable income and may reduce non-essential expenses; companies may also suspend recruitment or investment if they find that business has deteriorated. If these situations occur simultaneously, they may affect consumption, employment and economic activity. Economic models can help researchers analyze the relationships and allow policymakers to assess the possible impacts of different measures.

When the central bank decides to raise or lower interest rates, it must also consider prices and prosperity. Raising interest rates may curb demand and reduce inflationary pressure, but the burden on some borrowers may also increase. Lowering interest rates can reduce borrowing costs, but it does not mean that companies will definitely increase investment, and people will not necessarily spend more as a result.

The Royal Swedish Academy of Sciences pointed out that Hall and Woodford's research changed the way economics analyzes stabilization policy. Their related New Keynesian model can be used to explain and quantify the impact of stabilization policies on business cycles, and is currently used by central banks and fiscal authorities around the world.