Thomas J. Sargent and Christopher A. Sims are the names of the co-winners. They are both 68 years old and have been close friends since they were graduate students at Harvard.

The award was granted for the duo’s empirical research on cause and effect in the macroeconomy and their efforts to sort out the relationship between economic factors such as economic strategies and GDP, inflation, employment and investment in the modern world.

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The Nobel awards committee noted that Sargent has examined permanent structural changes in the economy such as what happens when monetary policy is delegated to an independent central bank, while Sims' work has focused on unexpected short-lived events such as interest rate changes. Sims has applied a macro-economic technique called vector autoregression to study how these shorter phenomena can affect the overall economy.

More on this year's Nobel Prizes: Medicine, physics, chemistry - The 2011 Nobel Peace Prize - Literature