Americans Thomas Sargent and Christopher Sims share the 2011 Nobel prize in economics for providing ways to understand the impact of policy changes on the economy. The prize is based on old research that is of great interest in the current global financial crisis.
"The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel, 2011, to Professor Thomas J. Sargent at New York University, New York, USA and Professor Christopher A. Sims at Princeton University, Princeton, USA," said Professor Staffan Normark.
Sixty-eight year-old Thomas Sargent is a professor of economics at New York University. Christopher Sims, also 68, is a professor of economics and banking at Princeton University.
Both men have studied how economic policy, such as raising interest rates or cutting taxes, affects such variables as GDP and inflation.
Professor Sargent’s work was based on a study of inflation policies in the post-World War II era, when many countries initially implemented a high-inflation policy.
Professor Sims’s so-called "vector auto-regression" analysis has been applied to examine, among other things, how interest rates set by central banks affects the economy.
Central bankers and government officials use the work of the two men to determine how changes in policy affect the economy.
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Their work has come under fire since the 2008 global financial crisis, however, as governments and central banks in Europe and the United States struggle to deal with serious economic problems.
Danny Quay, professor of economics at the London School of Economics, studied under Sargent. He called the choice "brilliant."
"The work that these two people did is going to be hugely important for helping us properly analyze how we come out of the current desperate financial situation we find ourselves in," said Quay.
But Sims told a news conference in Stockholm by telephone that resolving the current financial turmoil is not going to be an easy task.
"I don't have any simple answer, but I think the methods that I have used, and Tom has developed, are central to finding our way out of this mess. I think they point to a way to try to unravel why our serious problems develop and new research using these methods may help us lead us out of it," said Sims.
Both men carried out their research independently in the 1970s and 1980s. They will share the approximately $1.5 million prize.
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