NEW YORK – An American and a Norwegian won the 2004 Nobel Memorial Prize in economic sciences yesterday for research on how government policies affect economies around the world and why supply-side shocks like high oil prices can dampen business cycles.

The work by Norwegian Finn E. Kydland and Edward C. Prescott, a professor at Arizona State University at Tempe, has led to reforms at many of the world’s central banks, the citation said. Their research also has given academics better tools for understanding what causes economies to boom or go into recession, it added.

The two professors, who both earned their doctorates at Carnegie Mellon University in Pittsburgh, Pa., have collaborated on work since the 1970s.They will share an award worth 10 million Swedish kronor, or about $1.3 million.

Mr. Kydland, who is 60, teaches at Carnegie Mellon and at the University of California at Santa Barbara. Mr. Prescott, 63, has taught at a number of universities, including the University of Minnesota, the University of Chicago and Northwestern University. Besides teaching at Arizona State, he also serves as an adviser to the Federal Reserve Bank of Minneapolis.

The Royal Swedish Academy of Sciences in Stockholm, which oversees the prize, said that the professors’ research showed that governments and central banks could be more effective if they adopted consistent, long-term rules and followed them. It was published in the late 1970s, when many Western economies were shifting from one policy to another as they grappled with both slow growth and high inflation, or “stagflation.”

“The research shifted the practical discussion of economic policy away from isolated policy measures (and) towards the institutions of policymaking, a shift that has largely influenced the reforms of central banks and the design of monetary policy in many countries over the last decade,” the academy said.

The academy also praised the pair for “transforming the theory of business cycles by integrating it with the theory of economic growth.”

While most economists at the time looked at how changes in demand like consumer spending affect the economy, Messrs. Kydland and Prescott looked at supply-side changes, such as advances in technology or changes in oil prices, as driving forces in business cycles.

Mr. Prescott’s 2000 book, “Barriers to Riches,” made the argument that a key reason for the disparity in the standard of living among countries worldwide is impediments to adopting technology.

Mr. Kydland, who is on a brief visit to Norway, told the Associated Press that he learned about the prize while lecturing students at the Norwegian School of Economics and Business Administration in Bergen.

“I was a little perturbed when they interrupted my lecture until I got to the secretary’s office and found out what the phone call was about,” he said. “It is wonderful to get this recognition.”

Mr. Kydland is the third Norwegian to win the prize, joining Ragnar Frisch who won it in 1969 and Trygve Haavel mo, who won in 1989.

He said that the theories he and Mr. Prescott formulated encouraged governments and monetary authorities not to make jarring changes in their policies

“The idea is that state institutions should not take (economic steps) that people notice,” he said. “If people don’t notice, that is a good thing.”

Mr. Prescott, who became the fifth American to receive the award since 2000, told reporters in Tempe that he learned he had won the Nobel prize in a 4 a.m. phone call.

“I am honored and thank all those that have helped me, in particular Finn Kydland,” Mr. Prescott said. “The money is nice, but I am not in this game for the money. I am in it because I love doing it – figuring things out and interacting with students and colleagues.”

Robert Lucas, 1995 Nobel economics prize recipient and former colleague of Mr. Prescott, noted that Messrs. Prescott and Kydland had long been rumored as possible candidates for the prize.

“It was overdue,” said Mr. Lucas, a professor at the University of Chicago.

Mr. Prescott’s Nobel win was the first-ever by an Arizona State scholar, the school said.

Americans have dominated the Nobel prizes in economic sciences; 36 of the 58 winners have been Americans.

Last year’s winners were American Robert F. Engle and Briton Clive W. J. Granger for developing statistical tools that improved the forecasting of rates of economic growth, interest rates, and stock prices.

The economics prize is the only award not established in the will of Swedish industrialist Alfred Nobel, the inventor of dynamite. The medicine, physics, chemistry, literature and peace prizes were first awarded in 1901, while the economics prize was set up separately by the Swedish central bank in 1968.

The Nobel prizes are presented December 10, the anniversary of Nobel’s death. The peace prize is awarded in Oslo, and the other Nobel prizes are presented in the Swedish capital, Stockholm.