NOBEL PRIZE: Prof Finn Kydland of Norway and Prof Edward Prescott of the United States won the Nobel economics prize yesterday for research that laid the groundwork for more independent central banks and explained business cycles.
"Their work has not only transformed economic research, but has also profoundly influenced the practice of economic policy in general, and monetary policy in particular," the Royal Swedish Academy of Sciences said in its citation.
"It is a great honour and recognition - in fact the highest honour and recognition in economics," Prof Kydland (60) said from Bergen in Norway, where news of the prize reached him as he was delivering a lecture.
Prof Kydland, who teaches at Carnegie Mellon University and the University of California, said colleagues had joked about him getting the prize, "but I never paid any attention to it".
He shares the 10 million Swedish crown (€1.1 million) prize with Prof Prescott (63), who works at Arizona State University and the Federal Reserve Bank of Minneapolis.
Their 1977 article on the "time consistency problem" showed that policy makers tend to abandon longer-term aims to milk shorter-term benefits.
"We have seen a move toward more independent central banks with various forms of inflation targets. This reform movement we think is a direct implication of the kind of research in Kydland and Prescott's first article," said Prof Torsten Persson, chairman of the prize committee.