Ben Bernanke, the former chair of the United States Federal Reserve is among the individuals awarded with the Nobel Prize in economics. With Bernanke is Douglas Diamond and Philip Dybvig.
The Nobel prize was given to the three individual for the contributioon in the field of economics particularly on dealing with financial crises.
According to the Royal Sweding Academy of Sciences, the economists were given the award due to their critical works dating back in the 1980s.
The academy said that the three individuals were critical in the determination of bank’s existence, adding that good management of banks could help alleviate economic downturns and prevent financial meltdowns.
The works of the economists
Bernanke researched on the Great Depression. This helped him become one of the awardees of the Nobel Prize. With his expertise, Bernanke was able to deal with the global financial crisis of 2008.
“People had seen that banks fail, but it was more thought [of] as a consequence of the crisis rather than [a] cause of the crisis,” said the Nobel Committee, John Hassler.
“Now the views of Bernanke have become the conventional wisdom.”
Meanwhile, Diamond and Dyvbig were awarded due to their achievements in consolidating the relationship of the bank, the borrowers, and the savers. According to the duo, the goals of these entities are interconnected.
For instance, borrowers want to access funds but want to pay the sum in installments, while savers want to have reserve money in case they are in an emergency. Diamond and Dyvbig said lenders should have a good standing since it could affect their transactions.
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Diamond appeared in a press conference and stressed that the jacking up of interest rates in the United Kingfom meant instability of markets of the country.
However, he believes that experts and economists in the UK are well-knowledgeable enough of the lessons from the 2008 market crash.
“Recent memories of that crisis and improvements in regulatory policies around the world have left the system much, much less vulnerable,” he said.
The Bernanke magic
Taking a closer look at Bernanke’s achievements, he formerly served as chair of the Fed from 2006 to 2014.
During his tenure as the agency’s head, he was able to successfully curb the fallout that had negative effects to the US economy.
As chair, Bernanke also launched a program acquiring assets that could help bolster economic activity. Moreover, he enhanced the correspondence between the central bank and the public.
Bernanke believed that letting the public know of the central bank’s intention and plans could help both parties in managing finances. These strategies are now the standards set by the Feds at the current time.
“There’s a lot of question on … the legal ways the US regulators could have resolved Lehman, and some claim it was essentially impossible for them to do it. But had they found a way I think the world would have had less of a severe crisis than it did,” Diamond added.
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Currently, Bernanke serves as a senior fellow at the Brookings Institution, one of the leading think tanks of the nation.
Meanwhile, Diamond and Dyvbig are professors at the University of Chicago and Washington University in St. Lous, respectively.
Known as the Sveriges Riksbank Prize in Economic Sciences, the Nobel Prize is awarded to individuals whose contributions in their respective fields have positively affected the society and the world.
It also comes with a monetary award amounting to 10 million Swedish kronor or $885,370. The award will be equally divided to the three.
Contrary to popular belief, the Nobel Prize was not instituted by Alfred Nobel, but by the Central Bank of Sweden, in commemoration of Nobel.
Photo Credit: Nobel Foundation