STOCKHOLM — Former Federal Reserve Chair Ben Bernanke and 2 other U.S.-based economicexperts won the Nobel Prize in economics for researchstudy into bank failures — work that developed on lessons discovered in the Great Depression and assisted shape America’s aggressive action to the 2007-2008 monetary crisis.
The Nobel panel at the Royal Swedish Academy of Sciences acknowledged Bernanke, Douglas W. Diamond and Philip Dybvig on Monday for researchstudy that reveals “why preventing bank collapses is important.”
Their findings in the early 1980s laid the structures for managing monetary markets, the panel stated.
“Financial crises and anxieties are kind of the worst thing that can occur to the economy,” stated John Hassler of the Committee for the Prize in Economic Sciences. “We requirement to have an understanding of the system behind those and what to do about it. And the laureates this year supply that.”
Bernanke, 68, analyzed the Great Depression of the 1930s when he was a teacher at Stanford University, proving the threat of bank runs — when stressed individuals withdraw their costsavings — and how bank collapses led to prevalent financial destruction. He was Fed chair from early 2006 to early 2014 and is now with the Brookings Institution in Washington.
Before Bernanke, financialexperts saw bank failures as a repercussion, not a trigger, of financial declines.
Diamond, 68, based at the University of Chicago, and Dybvig, 67, based at Washington University in St. Louis, revealed how federalgovernment warranties on deposits can avoid a spiraling of monetary crises.
“Probably the most pleasing thing for us is that policymakers infact appear to comprehend it, and the insights that we had, which are quite basic, might be utilized in the real monetary crisis,” Diamond informed The Associated Press in Chicago.
When it comes to the international financial chaos developed by the COVID-19 pandemic and Russia’s war in Ukraine, the monetary system is “much, much less susceptible” to crises since of memories of the 2000s collapse and enhanced policy, Diamond stated in a call with the Nobel panel.
The trio’s researchstudy took on real-world significance when financiers sentout the monetary system into a panic throughout fall 2008, triggering the longest and most unpleasant economicdownturn consideringthat the 1930s.
Bernanke, then head of the Fed, teamed up with the U.S. Treasury Department to prop up significant banks and ease a lack of credit, the lifeline of the economy.
He slashed short-term interest rates to no, directed the Fed’s purchases of Treasury and homeloan financialinvestments and set up unprece