London: American-born economists Robert E. Hall and Michael Woodford won the Nobel Prize in Economics on Monday for their work on microeconomic foundations of macroeconomic stabilisation.
Hall is affiliated with Stanford University in California and Woodford with Columbia University in New York.
The duo has been rewarded for decades of work developing ground-up models currently used by central banks and finance ministries across the world to stabilise economies.
“With them, we are better equipped to deal with shocks in the economy, such as energy crises or sudden changes in how much households consume,” John Hassler, Chair of the Committee for the Prize in Economic Sciences, said in a statement.
The models developed by Hall to explain households’ consumption decisions, and by Woodford to explain businesses’ price-setting decisions, filled a gap that opened up after the oil crises of the 1970s, when the previous Keynesian models had apparently broken down.
The Economics prize is formally known as the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel.