Americans Thomas Sargent of New York University and Christopher A. Sims of Princeton University have won the Nobel Prize in economics.
In awarding the $1.5 million prize, with the formal title the Nobel Memorial Prize in Economic Sciences, the Royal Swedish Academy of Sciences cited the researchers "for their empirical research on cause and effect in the macroeconomy."
Sargent and Sims, both 68, carried out their research independently in the 1970s and '80s, but it is highly relevant today, as world governments and central banks seek ways to steer their economies away from another recession.
The two economists take different approaches to macroeconomics, with Sargent focusing on analyzing the effects of broad economic policy changes, while Sims has worked to identify and measure the effects of "temporary and unexpected changes," such as fluctuations in interest rates and deficits, according to the prize committee.
Sargent and Sims "have independently developed complimentary methods that make it possible to evaluate policy and trace effects over time," the prize committee said.
After announcing the award, Staffan Normark of the Royal Swedish Academy reached Sims by phone, who said of the award, "I couldn't be happier to be getting it with my colleague, Tom Sargent."
Sims said he and his wife had been asleep when the award committee called — and that they missed the first call, because his wife "could not find the talk button."
When the committee called back, Sims says he heard a Swedish accent and thought, "Maybe it is the Nobel Prize."
The citation for the award reads, in part:
How are GDP and inflation affected by a temporary increase inthe interest rate or a tax cut? What happens if a central bank makes a permanent change in its inflation target or a government modifies its objective for budgetary balance? This year's laureates in economic sciences have developed methods for answering these and many of other questions.
Sims' and Sargent's methods and ideas have "been adopted by both researchers and policymakers throughout the world," according to the citation.
Since the economics Nobel was first awarded in 1969, more than 40 Americans have received the award.
Last week, American Bruce Beutler and Frenchman Jules Hoffmann won the medicine prize for their research on innate immunity, when receptor proteins activate the first line of defense in the immune system after they recognize bacteria and other microorganisms as they enter the body.
They shared it with Canadian-born Ralph Steinman, who died three days before the announcement, and who was honored for his discovery of the dendritic cell and its role in adaptive immunity.
U.S.-born scientists Saul Perlmutter, Brian Schmidt and Adam Riess won the physics prize for discovering that the universe is expanding at an accelerating pace, while Israeli scientist Dan Shechtman won the chemistry award for his discovery of quasicrystals, a mosaic-like chemical structure that researchers previously thought was impossible.
Acclaimed Swedish poet Tomas Transtromer won the literature prize and Liberian President Ellen Johnson Sirleaf, Liberian activist Leymah Gbowee and Tawakkul Karman of Yemen shared the Nobel Peace Prize "for their nonviolent struggle for the safety of women and for women's rights to full participation in peace-building work".