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Nobel Prize winners for Economics announced

The 2022 Nobel Prize in Economics has been awarded to Bernanke, Diamond and Dybving. Ben S. Bernanke was the chairman of the US Federal Reserve from 2006 to 2014.

Three US economists, including the former Chairman of the US Federal Reserve (Fed), Ben Bernanke, won the 2022 Nobel Prize in Economics for their work on banks and preventing financial crises.

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Bernanke, Douglas Diamond, and Philip Dybvig began their studies in the early 1980s on how regulating the financial sector and government subsidies to banks on the brink of bankruptcy could save the economy from a deeper crisis.

This work of three economists offered important solutions for how governments can manage crises such as the Great Depression of the 1930s, the Great Recession in 2008, and the global stagflation due to the recent coronavirus outbreak.

When announcing the winners of the 2022 Nobel Prize in Economics, the Swedish Academy made the following statement: “The actions taken by central banks and regulatory authorities around the world to deal with two recent major crises, the Great Recession and the economic contraction due to the Covid-19 Pandemic, It is largely inspired by the research of economists who have won (this year’s Nobel Prize in Economics).”

During the global financial crisis of 2008 and 2009, governments around the world announced financial packages to bail out banks.

 

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Ironically, Ben Bernanke was Fed chairman during the 2008 bankruptcy of giant investment bank Lehman Brothers.

Bernanke stated that there was no legal way to bail out Lehman at the time, so the best thing to do was to let the bank go bankrupt and use the government’s financial resources to prevent a larger systemic crisis.

The main work of the three economists was focused on understanding the role of banks in the economy, especially during financial crises, and analyzing how bankruptcies magnified and perpetuated the crises.

According to the study by the trio, depositors’ flocking to banks to withdraw their money could easily trigger the collapse of these financial institutions and subsequently put the entire financial sector at risk.

The Nobel Peace Prize, worth approximately $900,000, will be presented in Oslo on December 10, the anniversary of the death of Swedish industrialist Alfred Nobel. Nobel established the Nobel Prizes in his 1895 will.

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