The Nobel Prize in Economics is awarded to researchers in financial distress

Ben S. Bernanke, Douglas W. Diamond and Philip H. The Swedish Reichsbank presents this year’s award to three men, Tybvik.

Former US Federal Reserve (Fed) Chairman Ben Bernanke receives his third Nobel Prize in Economics for his research on so-called bank runs. These take place when many people try to withdraw their bank balances at the same time, resulting in the failure of even healthy banks. Bernanke — now at the Brookings Institution think tank — did the analysis Great Depression In the 1930s, the greatest economic crisis in modern history. Among other things, he showed how banks make financial crises more serious and lasting.

The American shares the prize with Douglas Diamond and Philip Tybwick from the United States. “Their findings improved how society copes with financial crises,” the Swedish Reichsbank said.

read more:

deposit

For the economy to function, consumer savings must be invested, for example, in housing. That’s fine in the long run, but when a saver wants immediate access to his money, a problem arises. Because businesses and homeowners cannot be forced to repay their loans early. A 1983 paper by Diamond and Dybwick described a solution to this problem. According to economists, banks attract deposits in the short term and convert those bank balances into loans to corporations, governments and individuals in the long term.

With a deposit you protect your savings for a predetermined period of time. You will often earn higher interest than a regular savings account because the bank knows for sure that you will have your savings for the agreed period.

Diamond and Dybvig showed how rumors can cause banks to collapse because bank runs occur. This situation can be avoided if the government has deposit insurance and works Lender of last resort to banks.

Swedish National Bank

The Nobel Prize in Economics was not invented by Alfred Nobel, but was established by the Swedish Reichsbank in 1969 to commemorate the bank’s 300th anniversary. So officially the prize is called the ‘Swedish National Bank Prize for Economic Sciences in Memory of Alfred Nobel’. Dutch economist Jan Tinbergen – together with Norwegian economist Ragnar Frisch – received the prize for the first time.

Source: Nobelprize.org

Image: Getty Images