The 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (also known as the Nobel Prize in Economics) was awarded to American scientists Robert E. Hall and Michael Woodford for developing macroeconomic models that help governments and central banks more effectively stabilize the economy.
This is stated on the award website.
Based on these models, governments can apply fiscal and monetary measures in a timely manner to mitigate economic downturns and curb excessive growth.
Economic stabilization policies have become especially important since economist John Maynard Keynes developed his theories nearly a century ago. During recessions, governments and central banks can lower interest rates and increase spending, and do the opposite during economic overheating.
However, in the 1970s, during the oil crises, Keynesian models stopped working. Instead of reducing unemployment, Western economies faced high inflation, weak growth, and unemployment. This put the effectiveness of stabilization policies into question.
Hall and Woodford proposed building economic models based on the decisions of individual households and businesses, rather than just statistical relationships between inflation, production, and consumption.
The expectations of people and businesses about the future play an important role in these models. When governments and central banks communicate their plans, they can influence these expectations and steer the economy in the right direction.
“The work of the laureates has provided us with a stable theoretical basis for models that are now used by central banks and governments around the world. With them, we are better prepared for shocks to the economy, such as energy crises or sudden changes in household consumption,” said the chairman of the economics prize committee John Gassler.
- The announcement of the Nobel Prize in Economics concludes Nobel Week. The winners of the Medicine, Chemistry, Literature, Physics and Peace Prizes have already been reported.
For more news and in-depth stories from Ukraine, please follow us on X.