Former Fed chief Bernanke wins Nobel Prize for economics

Ben Bernanke, the previous US Federal Reserve governor, has been awarded this 12 months’s Nobel Prize in economics together with Douglas Diamond of the College of Chicago and Philip Dybvig of Washington College, for his or her work on the function of banks within the economic system and monetary crises.

The committee handing out the SKr10mn ($886,000) award — formally generally known as the Sveriges Riksbank Prize in Financial Sciences in Reminiscence of Alfred Nobel — stated on Monday that the laureates’ work, begun within the early Eighties, had “improved our capacity to keep away from each critical crises and costly bailouts”. The trio will share the prize equally.

Bernanke, who oversaw the Fed’s response to the 2008 monetary disaster and subsequent recession, was identified for his evaluation of the Nice Melancholy of the Thirties — wherein he confirmed that financial institution runs had been a decisive issue inflicting the disaster to be so deep and extended.

Diamond and Dybvig had in the meantime demonstrated how banks carried out essential social capabilities as intermediaries between savers who wished instantaneous entry to their cash, and debtors who wanted to make long-term investments.

They confirmed how this made banks susceptible to rumours of their imminent collapse — and the way this vulnerability may very well be addressed via deposit insurance coverage schemes and by governments performing as a lender of final resort.