3 American Nobel Prizes for explaining the relationship between economics and banking

Ben S. Bernanke, Douglas W. Diamond and Philip H

The Royal Swedish Academy of Sciences on Monday announced the names of Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig as this year's Nobel laureates in economics. They will share one million Swedish kroner of the Nobel Prize in Economics.

Among these three, Ben S Bernanke is the former head of the US Federal Reserve. The work for which they won the 2022 Nobel Prize in Economics began in the early 1980s. They have shown through their research work, the practical importance of banks in regulating financial markets and dealing with economic crises.

The work of Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig has played a significant role in helping us better understand the role of banks in the economy, the Royal Swedish Academy of Sciences said in announcing the winners of the Nobel Prize in Economics on Monday. An important finding in their study is why it is important to avoid bank collapse. According to the Academy, Bernan's statistical analysis showed that when customers quickly withdraw their deposits out of fear that the bank may go bankrupt (bank run), this behavior of customers drives the bank towards collapse. because, The more customers withdraw their deposits, the greater the risk of bank failure. It was in this process that the fear of a relatively simple recession in the 1930s turned into a severe economic depression. Which is still considered to be the most dramatic and severe economic crisis in the world. The fear that a 'bank run' or bank failure can therefore easily become an inevitable event can collapse an institution and put the entire financial sector at risk.

Suggesting how to avoid this risk, the academy said, governments can prevent such dangerous dynamics in the economy by providing deposit insurance and by having banks take on the role of lenders in times of extreme danger.

David Card, Joshua D'Angrist and Guido W. Imbens, who won the Nobel Prize in Economics last year, used real-life experience as a research tool to understand how changes in monetary policy affect causality.

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