American academics Robert E. Hall and Michael Woodford have been awarded the 2026 Nobel Prize in economics for their work on developing economic models used by central banks to manage economic shocks, such as inflation and energy crises.
The Royal Swedish Academy of Sciences said in an Oct. 12 statement that Hall’s and Woodford’s macroeconomic models were based on a microeconomic understanding of how the actions of businesses and individual households affect the economy, rather than by focusing on top-down theories.
The academy said that central to these models was that businesses and households are “forward looking” when making decisions about purchases or savings. That means if governments communicate economic plans to these groups, they can influence their view of the future and influence the direction of the economy more effectively….