Americans Thomas Sargent and Christopher Sims shared the 2011 Nobel prize in economics on Monday for providing ways to understand the impacts of policy changes or shocks like surging oil prices on output, inflation or employment.

Sims, from Princeton University said their methods were 'essential to finding our way out of this mess' which the global economy is now in.

The Royal Swedish Academy of Sciences, which made the award, said the 10 million crown ($1.5 million) prize recognised their 'empirical research on cause and effect in the macroeconomy' and said their work laid the foundation for modern macroeconomic analysis.

'I think that the methods that I have used and that Tom has developed are essential to finding our way out of this mess,' Sims, 68, speaking by telephone, told a news conference hosted by the Academy after the prize was announced.

The Academy said in a statement: 'One of the main tasks of macroeconomic research is to comprehend how both shocks and systematic policy shifts affect macroeconomic variables in the short and long run.

'Sargent's and Sims's awarded research contributions have been indispensable to this work,' it added.

Sargent's work focused on systemic policy shifts, while Sims was more interested in shocks to the economy, such as surging oil prices, or a sharp drop in household consumption.

Sargent, 68, who is professor of economics and business at New York University, developed a mathematical model in his work and described it in a series of articles in the 1970s.

Sims, professor of economics and banking at Princeton, wrote an article in 1980 which introduced a new way of analysing data using a model called vector-autoregression.

The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968. It was not part of the original group of awards set out in dynamite tycoon Nobel's 1895 will but was established by Sweden's central bank, the Riksbank. - Reuters