US economists Ben Bernanke, Douglas Diamond and Philip Dybvig were awarded the Nobel Prize in Economics for 2022 for their research on banking and financial crises.
Ben Bernanke was chairman of the Federal Reserve from 2006 to 2014 and now works at the Brookings Institute in Washington. Diamond is a professor at the Booth School of Business at the University of Chicago and Dybvig is a professor at the Olin Business School of Washington University in St. Louis.
Il Nobel committee said their work, carried out in the early 1980s, “significantly improved our understanding of the role of banks in the economy, particularly during financial crises” and demonstrated why avoiding bank collapses is critical . They added that this was “valuable” during the 2008-2009 financial crisis and coronavirus pandemic.
Bernanke’s analysis of the Great Depression of the 1930s showed how and why bank runs were one of the main reasons why the crisis was so long and severe. The work of Diamond and Dybvig, on the other hand, analyzed the socially important role that banks play in smoothing out the potential conflict between savers who want to have access to their money and the economy that needs to invest their savings; and how governments can help prevent bank runs by providing deposit insurance and acting as a lender of last resort.
The Royal Swedish Academy of Sciences selected the winners from a list of candidates recommended by the Economic Sciences Award Committee. In a press conference following the announcement of the Nobel Prize, Diamond was asked if he had any warnings to give to banks, institutions and governments, given the current rise in interest rates and the predictions of another financial crisis. Diamond replied: “Financial crises, as Phil Dybvig and I view them, are aggravated as people begin to lose faith in the stability of the system. And this is essentially linked to how much the banking sector is thought to be profitable, as well as stable ”. Asked if he anticipated another financial crisis, he replied that the world is “much better prepared” than in 2008 and that regulatory improvements have made the system less vulnerable. “The banking sector itself is very strong, with good net worth and good risk management,” he said. “The problem is that these vulnerabilities, such as fear of bank runs, dislocations and crises, can manifest themselves anywhere, not just in commercial banks.”