The 2022 Nobel Prize in Economics goes to Americans Ben Bernanke, Douglas Diamond and Philip Dybvig. The Royal Swedish Academy of Sciences announced this on Monday. The trio received the prize for their research into the stability of banks during a financial crisis. According to the Academy , the winners have “significantly improved our understanding of the role of banks in the economy, particularly during financial crises.” In the 1980s, Diamond and Dybvig investigated how a bank could best function in an economy, without too great a risk of so-called bank runs. That is a situation where many people want to withdraw their savings at the same time, which can cause a bank to fail. They argued that the government can overcome this vulnerability of banks by acting as an emergency lender. In this way savings can be guaranteed. During the same period, Bernanke mainly focused on the great financial crisis of the 1930s, also known as the Great Depression. He showed that the crisis could become so severe and prolonged because of those bank runs. Because bank failures also cause information about borrowers to be lost, it took a long time before financial institutions were able to efficiently use savings again for investments that benefit the economy. With this Bernanke showed that banks are very important, but that they must be very well regulated. Preventing crises and expensive rescue operations Their insights help us to prevent both serious crises and expensive rescue operations, the Nobel Committee writes. They say that is important for policymakers, who were “largely motivated by the research of the winners” in determining their approach during the financial crisis in 2008 and the economic setback in the corona pandemic. All three economists are still engaged in research. Diamond is currently a professor at the University of Chicago, Dybvig is also a professor at Washington University in St. Louis. Bernanke is perhaps the best known of the three: he was the chairman of the US central bank, the Federal Reserve, from 2006 to 2014. He is currently affiliated with the American think tank Brookings Institution. Also read this interview with Guido Imbens: ‘The Nobel Prize changes your life greatly’ The Nobel Prize in Economics is always the last Nobel Prize to be announced. Notable winners include Milton Friedman and John Nash. Last year the prize was also won by three people, including the Dutch econometrician Guido Imbens. He received the prize together with his colleague Joshua Angrist for their research into the possibilities of using natural experiments to demonstrate causal relationships. The Prize for Economic Sciences The Nobel Prize in Economics is different from the other Nobel Prizes. Founder Alfred Nobel, chemist and inventor of dynamite, did not come up with the prize himself. It was the Swedish Central Bank that added the economics price to its arsenal in 1969, 68 years after the other prices were introduced. The occasion was the bank’s 300th anniversary. The official name is also different: The Prize of the Swedish National Bank for Economic Sciences in memory of Alfred Nobel. The Nobel Prize in Economics is awarded together with the regular Nobel Prizes during the annual ceremony. It will take place on December 10, the anniversary of Alfred Nobel’s death, in Stockholm. The prize is associated with an amount of 10 million Swedish kronor, converted about 900,000 euros, which the three must divide fairly.
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