WASHINGTON (Diya TV) — American economists Robert E. Hall and Michael Woodford won the Nobel economics prize Monday for research that helps central banks and governments respond to inflation, economic shocks and changes in consumer spending.
The Royal Swedish Academy of Sciences honored their work on the “microeconomic foundations of macroeconomic stabilization.” Their research connects decisions by individual households and businesses to economy-wide changes in consumption, production and prices.
Hall, a Stanford University professor emeritus, and Woodford, a Columbia University professor, developed models that policymakers use to assess economic conditions and choose measures to stimulate or restrain growth.
Hall’s research advanced economists’ understanding of household consumption and expectations. His work examined how people use information about their future circumstances when deciding how much to spend.
Woodford incorporated household behavior into models of monetary policy, emphasizing that interest-rate decisions work partly through public expectations. His research also examined how central banks can influence spending and investment by communicating their plans.
That approach, known as forward guidance, became particularly important after the global financial crisis, when interest rates approached zero and central banks had less room to cut them further.
During the award announcement, Woodford said policymakers must consider how people understand government decisions rather than treating economic management as simply adjusting policy controls.
“It’s a tremendous honor. It’s a surprise. But I’m feeling very good about it,” he said.
Hall has advised the U.S. Treasury Department, Justice Department and Federal Reserve Board. Woodford holds Columbia’s John Bates Clark professorship in political economy.
The economists will share twelve million Swedish kronor, approximately $1.2 million.
The award’s formal name is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. Sweden’s central bank established it in 1968, and the first award followed in 1969. It was not among the original prizes specified in Nobel’s will.
