The Nobel Prize in economics was awarded on October 10 to American economists Thomas Sargent, of New York University, and Christopher Sims, of Princeton University. They are recognized for their studies on how such economic policies as raising interest rates or cutting income taxes affects such larger economic factors as inflation and gross domestic product (GDP). Inflation is a continual increase in prices throughout a nation’s economy. GDP is the market value of all final goods and services produced in a country during a given period.

Sargent’s and Sims’s research, which was carried out independently in the 1970′s and 1980′s, is considered particularly important today as governments and such central banks as the U.S. Federal Reserve, the Bank of England, and the European Central Bank attempt to guide their national economies away from another recession. The economics prize committee of the Royal Swedish Academy of Sciences cites Sargent and Sims for independently developing “complimentary methods that make it possible to evaluate [economic] policy and trace [economic] effects over time.”