The Sveriges Riksbank Prize in Economic Sciences has been awarded to the American economists Robert Hall and Michael Woodford for developing the microeconomic foundations of macroeconomic stabilisation. The prize, widely known as the Nobel economics award, recognises research that has reshaped how central banks and governments understand and respond to economic shocks.
The award honours work built on New Keynesian models, a framework that gives policymakers a more rigorous understanding of how households and firms behave when economies are hit by sudden disruptions. That research has become central to modern monetary policy, influencing how institutions such as the Federal Reserve, the European Central Bank and the Bank of England design interest rate decisions and crisis responses.
Hall and Woodford are both US-based economists whose contributions helped bridge the gap between abstract economic theory and the practical demands of stabilisation policy. Their work addressed a long-standing problem in macroeconomics: how to explain large-scale economic fluctuations using the microeconomic behaviour of individual agents. By grounding macroeconomic models in the decisions of households and businesses, they gave policymakers tools to assess how shocks propagate through an economy and how policy can dampen their effects.
The prize announcement came after a period of speculation in prediction markets, where several economists had featured among the possible winners. Sidney Winter, professor emeritus of management at the Wharton School, and Lawrence Katz, the Elisabeth Allison Professor of Economics at Harvard University, had appeared high on Polymarket's odds in the hours before the announcement, though the market remained volatile throughout the morning.
The recognition of Hall and Woodford places their research at the centre of contemporary debates about inflation, growth and the limits of monetary policy. Their framework has been used to analyse how central banks should respond when inflation surges, when demand collapses, or when economies face simultaneous shocks that pull policy in different directions. The New Keynesian approach they helped develop remains a dominant paradigm in central banking and academic macroeconomics.
The award also highlights the growing importance of stabilisation policy in a period marked by volatile energy prices, supply chain disruptions and shifting global growth prospects. Governments and central banks have faced repeated tests of their ability to manage shocks without destabilising output or employment, and the theoretical foundations laid by Hall and Woodford have informed those responses.
The Sveriges Riksbank Prize in Economic Sciences is awarded annually and is distinct from the original Nobel Prizes established by Alfred Nobel's will, though it is presented alongside them. It has been given to economists whose work has shaped fields ranging from development and trade to game theory and financial economics. This year's award recognises a body of research that continues to influence how policymakers think about the relationship between individual behaviour and aggregate economic outcomes.
For central banks and finance ministries, the practical implications are significant. The models developed by Hall and Woodford help explain why economies do not always self-correct quickly after shocks, and why active stabilisation policy may be necessary to reduce the depth and duration of downturns. That insight has shaped the mandates and strategies of monetary authorities around the world.
The prize announcement was made by the Royal Swedish Academy of Sciences, which oversees the economics award. The recognition of two American economists continues a pattern of US-based researchers dominating the field in recent decades, reflecting the strength of American academic institutions in economic research and the global influence of their work.