Michael Woodford

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Michael Woodford’s research helped shape how central banks use interest rates and communicate monetary policy to manage economic fluctuations.

© Fundacion BBVA

Michael Woodford is an American economist who shared the 2026 Nobel Prize for Economics (officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) with Robert E. Hall. The Royal Swedish Academy of Sciences honored them for their work in developing “new macroeconomic models that have significantly improved our ability to implement effective stabilization policy.” Their models are founded on how microeconomic decisions made by households and businesses influence the broader economy, helping governments and central banks design and time fiscal and monetary interventions to cushion the impact of the economy’s booms and busts.

Woodford received a bachelor’s degree from the University of Chicago in 1977 and a law degree from Yale Law School in 1980. In 1981, he was awarded a MacArthur Foundation fellowship. He completed a doctorate in economics at the Massachusetts Institute of Technology in 1983.

Woodford began his career as an assistant professor in the department of economics at Columbia University (1984–86). He then taught at the University of Chicago (1986–1995) and Princeton University (1995–2004) before returning to Columbia as the John Bates Clark Professor of Political Economy, a post he has held since 2004. From 2022 to 2025, he served as department chair.

Woodford’s honors include the Erwin Plein Nemmers Prize in Economics (2024) and the BBVA Foundation Frontiers of Knowledge Award (2025). He has been a fellow of the Econometric Society since 1991 and the American Academy of Arts and Sciences since 2004. He has been a research associate at the National Bureau of Economic Research since 1994.

Woodford is one of the seminal figures of New Keynesian economics, an approach that builds on the theories of economist John Maynard Keynes by examining how decisions made by individual households and businesses affect the broader economy. In his influential work, Interest and Prices: Foundations of a Theory of Monetary Policy (2003), Woodford presented a macroeconomic model that factors in how households and businesses make decisions about consumption, production, and prices.

His model takes into account how individuals’ and businesses’ expectations of such variables as income, costs, and interest rates affect large-scale economic conditions, such as inflation. Woodford’s research showed how businesses set prices based partly on expectations about future costs and demand, rather than adjusting them continuously as economic conditions change. His findings help explain why changes in monetary policy can affect economic activity and inflation.

Woodford’s research gave governments and central banks an analytical framework for using tools—such as adjusting interest rates and communicating future policy—to respond to economic disruptions and better manage crises. One application is forward guidance, in which central banks communicate the likely future direction of interest rates to influence borrowing, spending, and investment decisions.

Following the 2007–08 financial crisis, the Federal Reserve and other central banks used forward guidance to stimulate economic activity after lowering short-term interest rates to nearly zero. Woodford’s framework has influenced monetary policymaking at central banks worldwide.