The Royal Academy of Sciences announced on Monday that three US-based economists won the 2022 Nobel Memorial Prize in Economic Sciences “for research on banks and financial crises.”
The winners are Ben Bernanke, former head of the US Federal Reserve and currently at the Brookings Institution in Washington DC; Douglas Diamond at the University of Chicago; and Philip Dybvig from Washington University in St. Louis, Missouri.
This year’s laureates “have significantly improved our understanding of the role of banks in the economy, especially during financial crises. An important finding of their research is why it is important to avoid bank collapses,” the academy said.
The chairman of the committee for the prize in economic science, Tore Ellingsen, said their “insights have improved our ability to avoid both severe crises and expensive rescues” in banking systems.
The beginnings of Bernanke, Diamond and Dybvig’s analysis date back to the early 1980s, and ever since their results “have been of great practical importance in regulating financial markets and managing financial crises,” the academy said.
The academy statement said Diamond and Dybvig’s theory shows how banks offer an optimal system and “by acting as intermediaries accepting deposits from many savers, banks can allow depositors to access their money when they want, while offering long-term loans to borrower.’
Diamond has also shown how banks fulfill a societally important function as intermediaries between savers and borrowers by “assessing the creditworthiness of borrowers and ensuring that loans are used for good investments,” according to the awards committee.
The academy said Ben Bernanke analyzed the Great Depression of the 1930s, the worst economic crisis in modern history, and has shown how banking “was a critical factor in making the crisis so deep and prolonged.”
Bernanke has shown, the academy said, that “when the banks collapsed, valuable information about borrowers was lost and could not be quickly recreated,” and therefore “society’s ability to channel savings into productive investment was significantly impaired.”
The winners share a prize of $900,000.
The Nobel Memorial Prize in Economic Sciences was not included in Alfred Nobel’s will. Officially known as the Swedish Riksbank Prize in Economic Science in Memory of Alfred Nobel, it was established in 1968 by the Riksbank in memory of Alfred Nobel to mark the bank’s 300th anniversary.
It was first awarded in 1969 and has been financed by the bank ever since.
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Source: sn.dk