Nobel Prize Economics for 2011 is been shared by two US academics Thomas Sargent and Christopher Sims.
The two conducted separately in the 1970s were efforts to model and quantify cause and effect in macroeconomics. Their study laid emphasis on how economic policy such as raising interest rates or cutting taxes affects microeconomic variables such as GDP and Inflation.
The award's official name is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The five main prizes are in physics, chemistry, medicine, literature and peace. Thomas Sargent, 68, is a professor of economics at New York University.
The academy pointed to his work examining the post-World War II era, when many countries initially tended to implement a high-inflation policy, but eventually introduced systematic changes in economic policy and reverted to a lower inflation rate.
Sims, also 68 and now at Princeton, said of the world's present financial troubles: "If I had a simple answer to that I would have been spreading it around the world ... It requires a lot of slow work looking at data, unfortunately."
He urbanized a method based on “vector auto regression” to analyze how the economy copes up with the temporary changes in economic policy and other aspects like the effects of an increase in the interest rate set by a central bank.
Prof Sims said: "The methods that I have used and that Tom has developed are essential to finding our way out of this mess."
Peter Diamond, Dale Mortensen and Christopher Pissarides won the 2010 prize for their work on how regulation and policy affects jobs and wages.
