One of the 2011 Nobel Economics Prize winners said Monday his work tries to "untangle" the relationship between central bank actions and the rate of inflation.

Princeton University economist Christopher Sims, co-winner with New York University's Thomas Sargent, said he has developed statistical tools that have been useful in unraveling the effect of monetary policy on the economy.

"These methods have been used in many countries, and one of the things that have given them credibility is they tend to give consistent results," he said.

"The main contribution of this work is to provide a way to untangle the relationship between interest rates and inflation, so we can see what the effect of interest-rate policy changes are on the price level and inflation, and separate that from the reverse causality that makes central banks react to inflation by changing interest rates."

"I was very surprised," Sims said of receiving the notification of the award.

"We jumped right out of bed, because we imagined it would be a very busy morning," he said, adding that at first his wife couldn't find the talk button on the phone when the Nobel representatives contacted him "so they called back 10 minutes later."

He commented that "there have been many other people who have contributed" to his areas of research, and that "I think anyone who gets the Nobel Prize has to be a little bit embarrassed to be picked out when there have been so many people who have contributed."

Sims is Princeton's Harold H. Helm '20 Professor of Economics and Banking, and has been a faculty member at the New Jersey university since 1999.

Both economists are 68 and both have Ph.Ds from Harvard University.

According to NYU, Sargent's current work involves developing models to understand persistently high European unemployment rates and analyzing Federal Reserve policies since World War II and the response to Fed actions.

Sargent is the William R. Berkley Professor of Economics and Business at New York University and the Donald L. Lucas Professor in Economics, Emeritus, at Stanford University. He is also a senior fellow at the Hoover Institution at Stanford.

"Sargent and Sims have both made seminal contributions that allow researchers to specify, empirically implement, and evaluate dynamic models of the macroeconomy with a central role for expectations," the Nobel committee said.

Sims conducted research with Ben Bernanke, the current Federal Reserve chairman, who also was a professor at Princeton.

Among his areas of research is "rational inattention," or how people overlook information that is freely available to them.

"Everyone ignores or reacts sporadically and imperfectly to some information that they 'see,'" he wrote in a recent paper.

"I page through the business section of the New York Times most mornings, 'seeing' charts and tables of a great deal of information about asset markets. I also most days look at ft.com's charts of within-day movements of oil prices, stock indexes, and exchange rates once or twice. But most days I take no action at all based on this information I've viewed."

While economists seek models to determine how people process information, Sims wrote that "'rational inattention' models introduce the idea that people's abilities to translate external data into action are constrained by a finite... 'capacity' to process information."

Sims is the sixth Princeton faculty member to win the economics prize, the most recent of which went to Paul Krugman. Sargent is the second Nobel economics laureate at NYU.

Sargent worked on structural macroeconomics, which can be used to analyze permanent changes in economic policy.

While the pair worked separately, their work is complementary and "has been adopted by researchers and policymakers around the world... (and their methods) are essential tools in macro-economic analysis," the Nobel committee said.