Two U.S.-based professors have won this year's Nobel Prize for Economics. The award has gone to Finn Kydland and Edward Prescott for their work in a field known as dynamic macro-economics.
The men will split a prize of about $1.3 million.
Mr. Kydland is a Norwegian-born, 60-year-old professor at Carnegie Mellon University in Pittsburgh, Pennsylvania and the University of California in Santa Barbara.
Mr. Prescott is 63-years-old and a U.S. citizen who teaches at Arizona State University and works as a researcher for the Federal Reserve Bank in Minneapolis, Minnesota.
The jury of the Swedish Nobel committee says research by the two professors, beginning in the 1960s has, in the panel's words, "provided the foundations for a highly improved theory of both macro-economic policy design and business cycle fluctuations."
The work of Mr. Kydland and Mr. Prescott led to a fundamental re-thinking of the economic theories of British economist John Maynard Keynes, who said the Great Depression of the 1930s was caused primarily by a decline in demand by consumers and businesses.
The Kydland-Prescott research found that shocks to the supply side, such as rising oil prices and declining productivity growth, also had a crucial impact on large-scale economic fluctuations.
The theories of the two economists were considered a major breakthrough, which helped explain the 1970s phenomenon of "stagflation", when unemployment and inflation simultaneously affected Western economies.
The Kydland-Prescott models are now used by central banks, international organizations, and other policy-makers to develop business-cycle forecasts.