STOCKHOLM—Americans Thomas Sargent and Christopher Sims won the Nobel economics prize on Monday “for their empirical research on cause and effect in the macroeconomy,” the Royal Swedish Academy of Sciences said.

The prize committee said the winners have developed methods for answering question, such as how economic growth and inflation are affected by a temporary increase in the interest rate or a tax cut. Sargent and Sims—both 68— carried out their research independently in the 1970s and ‘80s.

“Today, the methods developed by Sargent and Sims are essential tools in macroeconomic analysis,” the citation said.

Sargent is a professor at New York University, and Sims is a professor at Princeton University.

“How are GDP and inflation affected by a temporary increase in the interest rate or a tax cut? What happens if a central bank makes a permanent change in its inflation target or a government modifies its objective for budgetary balance? This year’s laureates in economic sciences have developed methods for answering these and many of other questions,” the citation said.

“Thomas Sargent has shown how structural macroeconometrics can be used to analyze permanent changes in economic policy. This method can be applied to study macroeconomic relationships when households and firms adjust their expectations concurrently with economic developments.

“Christopher Sims has developed a method based on so-called vector autoregression to analyze how the economy is affected by temporary changes in economic policy and other factors. Sims and other researchers have applied this method to examine, for instance, the effects of an increase in the interest rate set by a central bank.”

The economics prize capped this year’s Nobel announcements. The awards will be handed out on December 10—the anniversary of prize founder Alfred Nobel’s death. The economics prize is not among the original awards established in Nobel’s 1895 will, but was created in 1968 by the Swedish central bank in his memory.