{"id":197,"date":"2026-10-19T12:00:00","date_gmt":"2026-10-19T09:00:00","guid":{"rendered":"https:\/\/127.0.0.1\/ecb-a-nobel-prize-for-microeconomic-foundations-of-macroeconomic-stabilisation\/"},"modified":"2026-10-19T12:00:00","modified_gmt":"2026-10-19T09:00:00","slug":"ecb-a-nobel-prize-for-microeconomic-foundations-of-macroeconomic-stabilisation","status":"publish","type":"post","link":"https:\/\/www.marketreviewdaily.com\/ar\/ecb-a-nobel-prize-for-microeconomic-foundations-of-macroeconomic-stabilisation\/","title":{"rendered":"ECB: A Nobel Prize for microeconomic foundations of macroeconomic stabilisation"},"content":{"rendered":"

The summary above is from the announcement ECB<\/strong> published on October 19, 2026.<\/p>\n

What the announcement says<\/h2>\n
\n

On 12 October this year, the Royal Swedish Academy of Sciences awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Robert E. Hall and Michael Woodford \u201cfor microeconomic foundations of macroeconomic stabilisation\u201d. After having honoured outstanding contributions in growth theory last year, this year\u2019s award focuses on the second key aspect of economic policy: stabilising the economy in the short run.<\/p>\n

From an economic policy perspective, economic theory needs to answer two fundamental questions:<\/p>\n

First, where is the economy headed in the long run: is economic output growing, are consumers getting wealthier and able to increase their consumption over time? In other words, what are the general trends in the economy?<\/p>\n

Second, what causes fluctuations around the trend in the short run? In other words, why can output be temporarily above or below its trend level? Economists call these situations economic booms and economic busts or recessions and refer to the short-run cycling of the economy between booms and busts as business cycles. They refer to the practice of decreasing both booms and busts to smooth out business cycle fluctuations as stabilisation policy. Monetary and fiscal policies are two leading examples of stabilisation policy.<\/p>\n

Economists learned in the late 1920s that analysing the economy from a purely long-run perspective falls short. The long-run perspective, usually referred to as growth theory in economics, emphasises that the productive capacity of the economy is what determines economic outcomes such as output and prices. This perspective highlights the supply side since the productive capacity of the economy is ultimately determined by the production technology and the amount and quality of the factors of production (labour, machines, resources) available to producing firms. The experience of the Great Depression highlighted fundamental shortcomings of this perspective. It could not explain why economic output collapsed and unemployment surged on a scale that could not be explained by changes in the economy\u2019s productive capacity alone.<\/p>\n

In his seminal work, John Maynard Keynes provided an alternative theory of short-run economic fluctuations which emphasised the demand side of the economy instead.[1] A key element of the \u201cKeynesian\u201d theory is that no matter the productive capacity of the economy, if demand falls short of supply, output will fall below its trend level. As a result, economic policy needs to address the demand side of the economy. One way to stimulate demand, Keynes suggested, was by providing employment opportunities and hence income to consumers. The implementation of the New Deal in the United States following the theory Keynes later articulated in his book is widely regarded by economists as the first instance of stabilisation policy, and the Keynesian theory of the short run is considered the birth of business cycle theory.<\/p>\n

A theory of consumption and a methodology for economic research<\/p>\n

A cornerstone of the Keynesian theory is the demand for the consumption of economic goods and services. But Keynesianism lacked a theory of consumption behaviour beyond postulating general aggregate regularities, such as that aggregate consumption in the economy presumably increases when more income is available once households have paid off their running expenses. This gap in economic theory became especially clear during the oil crises of the 1970s when the economy did not behave as predicted by the postulated relationships between aggregate variables.[2] This led to the search for a theory of the economic behaviour of individuals that could be aggregated up to provide a theoretical foundation for the relationship between aggregate variables. Economists call the approach of providing a mathematical theory of individual behaviour for use in models analysing the macroeconomy the \u201cmicroeconomic foundations\u201d of macroeconomic models.<\/p>\n

ECB<\/cite><\/p><\/blockquote>\n

Policy decisions and official commentary move currency and index pricing, and they shape the cost of holding a leveraged position.<\/p>\n

Read the full announcement on ECB<\/a><\/p>\n

Compiled automatically from the source listed below. Follow the link for the full announcement.<\/p>\n","protected":false},"excerpt":{"rendered":"

From Keynes\u2019s famous \u201cdigging holes\u201d example to modern stabilisation policy, Economics has come a long way in understanding how governments can\u2026<\/p>","protected":false},"author":0,"featured_media":0,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-197","post","type-post","status-publish","format-standard","hentry","category-markets"],"_links":{"self":[{"href":"https:\/\/www.marketreviewdaily.com\/ar\/wp-json\/wp\/v2\/posts\/197","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.marketreviewdaily.com\/ar\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.marketreviewdaily.com\/ar\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/www.marketreviewdaily.com\/ar\/wp-json\/wp\/v2\/comments?post=197"}],"version-history":[{"count":0,"href":"https:\/\/www.marketreviewdaily.com\/ar\/wp-json\/wp\/v2\/posts\/197\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.marketreviewdaily.com\/ar\/wp-json\/wp\/v2\/media?parent=197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.marketreviewdaily.com\/ar\/wp-json\/wp\/v2\/categories?post=197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.marketreviewdaily.com\/ar\/wp-json\/wp\/v2\/tags?post=197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}