Three British Nobel winners in a week as data models win prize for economist prize

A British economist working in the United States has won the 2003 Nobel economics prize, the Royal Swedish Academy of Sciences said yesterday.

Clive Granger will share the award - officially known as the Bank of Sweden Prize in economic sciences in Memory of Alfred Nobel - and the 10 million swedish kronor (£800,000) prize with an American academic, Robert Engle.

They were awarded the honour for separate groundbreaking discoveries that improved the way time series models were used to analyse economic data.

Mr Granger is the third Briton to pick up a Nobel prize this week. The physics prize went to Anthony Leggett for work on superconductivity; and Sir Peter Mansfield won the prize in physiology or medicine for discoveries leading to a technique that reveals images of the inner organs.

Mr Granger and Mr Engle came up with innovations that eliminate errors that can occur in long-running time series for data such as GDP, inflation, interest rates and share prices.

Mr Granger highlighted biases in economic models that were used right up to the 1980s to test theories, but which were liable to produce distorted results.

"This difficulty was not well understood among model builders three decades ago," the Royal Swedish Academy of Sciences said in its citation. "Granger has achieved [a] breakthrough...which has radically changed the way empirical models of macroeconomic relationships are formulated."

Economists hailed the award for his theory, developed in the 1970s and 1980s and known as cointegration, saying it permanently changed the whole world of econometrics.

"It is very much deserved," said Professor Javier Hidalgo at the London School of Economics. "They opened a new world and new fields that are now applied by banks."

Mr Granger, 69, is emeritus professor of economics at the University of California in San Diego. He was born in Swansea in 1934 and completed his undergraduate degree and doctorate at Nottingham University. He is currently on sabbatical in New Zealand.

PAST MASTERS - BRITISH WINNERS

Britain's Nobel laureates in economics:

1972: Sir John R Hicks and Kenneth J Arrow (US) - general economic equilibrium theory and welfare theory

1974: Friedrich August Von Hayek and Gunnar Myrdal (Sweden) - theory of money and economic fluctuations

1977: James E Meade and Bertil Ohlin (Sweden) - international trade and capital movements

1979: Sir Arthur Lewis and Theodore W Schultz (US) - economic development in developing countries

1984: Sir Richard Stone - development of systems of national accounts

1991: Ronald H Coase - transaction costs and property rights

1996: James A Mirrlees and William Vickrey (US) - incentives under asymmetric information