The Nobel Prize for Economics 2022 also known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was jointly awarded to Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig for research on banks and financial crises.
BREAKING NEWS:
The Royal Swedish Academy of Sciences has decided to award the 2022 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig “for research on banks and financial crises.”#NobelPrize pic.twitter.com/cW0sLFh2sj— The Nobel Prize (@NobelPrize) October 10, 2022
The Nobel Committee said the work done by Bernanke, Diamond and Dybvig was ‘crucial to subsequent research that has enhanced our understanding of banks, bank regulation, banking crises and how financial crises should be managed’ in a tweet.
The work for which Ben Bernanke, Douglas Diamond and Philip Dybvig are being recognised has been crucial to subsequent research that has enhanced our understanding of banks, bank regulation, banking crises and how financial crises should be managed.#NobelPrize pic.twitter.com/4drJwZ0yF9
— The Nobel Prize (@NobelPrize) October 10, 2022
The Nobel Committee said the theoretical models prepared by these Nobel Laureates explain why banks exist, ‘how their role in society makes them vulnerable to rumours about their impending collapse and how society can lessen this vulnerability.’
The research presented by this year’s laureates in economic sciences reduces the risk of financial crises developing into long-term depressions with severe consequences for society, which is of the greatest benefit to us all. #NobelPrize
— The Nobel Prize (@NobelPrize) October 10, 2022
Diamond and Dybvig, two of this year’s three laureates, presented a solution to bank vulnerability. They said deposit insurance from the government presents such a solution. “When depositors know that the state has guaranteed their money, they no longer need to rush to the bank as soon as rumours start about a bank run,” the Nobel Committee said in a tweet explaining the nature of their accomplishments which won them the prestigious award.
Diamond’s works also showed that banks perform important societal roles. They act as intermediaries between savers and borrowers, which makes them better suited to understand borrowers’ creditworthiness and ensure loans are used for good investments.
Bernanke on the other hand used statistical analysis and historical source research to show how failing banks played a ‘decisive role in the global depression of the 1930s’ which is seen as the worst global economic crisis in modern history. His work explains why the impacts of the 1930s economic crisis were long-lasting.
He also showed that the main cause of the 1930s Great Depression was the decline in the banking system’s ability to channel savings into productive investments, a press release by the Nobel Committee said.
Bernanke was head of the US central bank, the Federal Reserve, when the financial crisis of 2008–2009 hit the global financial markets.
The prize has been awarded 53 times to 89 laureates between 1969 and 2021. In 2021, the honour was jointly accorded to David Card for ‘his empirical contributions to labour economics’ and Joshua D. Angrist and Guido W. Imbens for ‘methodological contributions to the analysis of causal relationships.’
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