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Stockholm:
The Nobel Prize for Economics will be shared by Christopher A.
Sims and Thomas J. Sargent of the US "for their empirical research
on cause and effect on the macroeconomic", it was announced here
Monday.
The two laureates will share the 10 million Swedish kronor (about
$1.5 million) prize, Xinhua reported.
"The 2011 Sveriges Riksbank Prize in Economic Sciences in memory
of Alfred Nobel has been awarded jointly to Christopher A. Sims
and Thomas J. Sargent for their empirical research on cause and
effect on the macroeconomy," Staffan Normark, Permanent Secretary
of the Royal Swedish Academy of Sciences said.
Born in 1943, Sargent got his Ph.D from Harvard University in 1968
and is professor of economics and business at New York University.
Sims also obtained a Ph.D from Harvard University in the same
year. He is professor at Princeton University.
The Nobel economics award, established in 1968 and officially
called the Sveriges Riksbank Prize in Economic Sciences in Memory
of Alfred Nobel, is the last of the six prizes announced this
year. It was not part of the original crop of Nobel Prizes set out
in Nobel's will.
This year's laureates have developed methods for answering many
questions regarding the causal relationship between economic
policy and different macroeconomic variables such as GDP,
inflation, employment and investments, the Nobel committee said in
a statement.
Sargent has shown how structural macroeconometrics can be used to
analyse permanent changes in economic policy such as macroeconomic
relationships when households and firms adjust their expectations
concurrently with economic developments.
He has also examined 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, according to the
statement.
Sims has developed a method based on so-called vector
autoregression to analyse how the economy is affected by temporary
changes in economic policy and other factors.
He and other researchers have applied this method to examine, for
instance, the effects of an increase in the interest rate set by a
central bank.
The Nobel committee said that although the two carried out their
research independently, their contributions are complementary in
several ways.
The laureates' seminal work during the 1970s and 1980s has been
adopted by both researchers and policymakers throughout the world.
Today, the methods developed by Sargent and Sims are essential
tools in macroeconomic analysis, the committee said.
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