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Asharq Al-Awsat
Asharq Al-Awsat
Lifestyle
Asharq Al-Awsat

Bernanke, Diamond, Dybvig Win Nobel Economics Prize for Financial Crises Studies

(L-R) 2022 Nobel Economics Prize laureates Ben Bernanke, Douglas Diamond and Philip Dybvig are seen on a display during a press conference to announce the winners of the 2022 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel at the Royal Swedish Academy of Sciences in Stockholm, on October 10, 2022. (AFP)

A trio of US economists including Former Federal Reserve chief Ben Bernanke won this year's Nobel Economics Prize on Monday for research on how propping up failing banks can stave off an even deeper economic crisis.

Bernanke, along with Douglas Diamond and Philip Dybvig won the 2022 prize for their work starting in the early 1980s that carried practical importance in regulating financial markets and dealing with financial crises.

"Ben Bernanke, Douglas Diamond and Philip Dybvig, have significantly improved our understanding of the role of banks in the economy, particularly during financial crises," the Royal Swedish Academy of Sciences said on Monday.

"An important finding in their research is why avoiding bank collapses is vital," the academy added.

The Academy said that Bernanke showed with statistical analysis that bank runs led to bank failures and this was the mechanism that turned a relatively ordinary recession into the depression in the 30s, the world's most dramatic, and, severe crisis

Bank runs can easily become self-fulfilling leading to the collapse of an institution and putting the entire financial sector at risk.

"These dangerous dynamics can be prevented through the government providing deposit insurance and acting as a lender of last resort to banks," the Academy said.

The trio joins such luminaries as Paul Krugman and Milton Friedman, previous winners of the prize.

The majority of previous laureates have been from the United States.

The economics prize is not one of the original five awards created in the 1895 will of industrialist and dynamite inventor Alfred Nobel.

It was established by Sweden's central bank and first awarded in 1969, its full and formal name being the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

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