Nobel Economics Prize awarded to US trio Ben Bernanke, Douglas Diamond and Philip Dybvig

The 2022 Economics Prize has been jointly awarded to three US-based economists, Ben Bernanke – a former chair of the US Federal Reserve – Douglas Diamond and Philip Dybvig for their contributions on explaining the role of banks in the economy, the Royal Swedish Academy of Sciences said on Monday.

The trio has “significantly improved our understanding of the role of banks in the economy, particularly during financial crises, as well as how to regulate financial markets”, the jury said.

“Their analyses have been of great practical importance in regulating financial markets and dealing with financial crises”, the committee added, and said their research had shown “why avoiding bank collapses is vital”.

“Ben Bernanke, in a paper from 1983 showed with statistical analysis, and historical sources, 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 that we have seen in the modern history,” said John Hassler, a member of committee for the Nobel Prize for Economics.

Bernanke, 68, along with Diamond, a professor at the University of Chicago born in 1953, and Dybvig, 67, a professor at Washington University in St Louis, were in turn honoured for showing how “banks offer an optimal solution” for channelling savings to investments by acting as an intermediary.

The trio join such luminaries as Paul Krugman and Milton Friedman, previous winners of the prize. The majority of previous laureates have been from the United States. Only two women have ever won, Elinor Ostrom in 2009 and Esther Duflo in 2019.