10 October 2011 Last updated at 12:13 GMT
US academics Thomas Sargent and Christopher Sims have won the 2011 Nobel economics prize.
The Royal Swedish Academy of Sciences cited "their empirical research on cause and effect in the macroeconomy".
They had studied how economic policy, such as raising interest rates or cutting taxes, affects macroeconomic variables such as GDP and inflation.
The award's official name is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.It was not part of the original group of awards set out in Swedish chemist Alfred Nobel's 1895 will, but was established by Sweden's central bank, the Riksbank, in 1968.
The five main prizes are in physics, chemistry, medicine, literature and peace.'Essential methods'
Thomas Sargent, 68, is a professor of economics at New York University.
The academy pointed to his work examining the post-World War II era, when many countries initially tended to implement a high-inflation policy, but eventually introduced systematic changes in economic policy and reverted to a lower inflation rate.
Christopher Sims, also 68, is a professor of economics and banking at Princeton University.
The academy said he had developed a method based on "vector autoregression" to analyse how the economy is affected by temporary changes in economic policy and other factors - for instance, the effects of an increase in the interest rate set by a central bank.
Prof Sims said: "I think that the methods that I have used and that Tom has developed are essential to finding our way out of this mess."
Peter Diamond, Dale Mortensen and Christopher Pissarides won the 2010 prize for their work on how regulation and policy affects jobs and wages.