Hall and Woodford Win the Nobel Prize in Economics for Work on Steadying the Economy

Keypoints:

• Robert E. Hall of Stanford University and Michael Woodford of Columbia University share the 2026 prize
• The Royal Swedish Academy of Sciences cited their microeconomic foundations of macroeconomic stabilization
• Their models are used by central banks and finance ministries around the world
• Woodford's 2003 book Interest and Prices is the standard reference for modern monetary theory
• The prize is 12 million Swedish kronor, about $1.2 million, split between the winners

The Royal Swedish Academy of Sciences announced the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel on 12 October. It went to American economists Robert E. Hall and Michael Woodford. This is the last prize of the 2026 season. Both earned their doctorates at the Massachusetts Institute of Technology (MIT).

Their shared question is how to smooth booms and busts. John Hassler, chair of the prize committee, said governments and central banks want to reduce the size of economic swings. The aim is to stop the economy from getting stuck in high unemployment or losing control over inflation.

Hall's contribution came first. The committee cited his late-1970s research on expectations and household consumption. Households, in his framework, look ahead and plan spending around expected lifetime income. That idea made the forward-looking household a building block of modern macroeconomics.

Woodford built on that base. He added firms that set their own prices but cannot change them every day, which economists call sticky prices. He then closed the model with a central bank that sets an interest rate. The result is the three-equation New Keynesian model, set out in his 2003 book Interest and Prices. The title echoes an 1898 book by the Swedish economist Knut Wicksell.

One result changed how central banks talk. In Woodford's models, expectations matter as much as the interest rate itself. Promises about future policy became a tool, which is the logic behind forward guidance. Much of this work was done with Julio Rotemberg, who died in 2017.