WASHINGTON: One of the 2011 Nobel Economics Prize winners said Monday his work tries to "untangle" the relationship between central bank actions and the rate of inflation.
Princeton University economist Christopher Sims, co-winner with New York University's Thomas Sargent, said he has developed statistical tools that have been useful in unraveling the effect of monetary policy on the economy.
"These methods have been used in many countries, and one of the things that have given them credibility is they tend to give consistent results," he said.
"The main contribution of this work is to provide a way to untangle the relationship between interest rates and inflation, so we can see what the effect of interest-rate policy changes are on the price level and inflation, and separate that from the reverse causality that makes central banks react to inflation by changing interest rates."
"I was very surprised," Sims said of receiving the notification of the award.
"We jumped right out of bed, because we imagined it would be a very busy morning," he said, adding that at first his wife couldn't find the talk button on the phone when the Nobel representatives contacted him "so they called back 10 minutes later."
Sims, who also has a Ph.D from Harvard, is Princeton's Harold H. Helm '20 Professor of Economics and Banking, and has been a faculty member at the New Jersey university since 1999.
Sargent is the William R. Berkley Professor of Economics and Business at New York University and the Donald L. Lucas Professor in Economics, Emeritus, at Stanford University. He is also a senior fellow at the Hoover Institution at Stanford.
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