Nobel Prize 2022 in Economics awarded to Ben Bernanke, Douglas Diamond and Philip Dybvig

(From L to R) Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig

The Royal Swedish Academy of Sciences has awarded the 2022 Nobel in economics to three US-based economists -- Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig --"for research on banks and financial crises," according to the official release issued on October 10.

The formal award is called 'Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.'

BREAKING NEWS:
The Royal Swedish Academy of Sciences has decided to award the 2022 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig “for research on banks and financial crises.”#NobelPrize pic.twitter.com/cW0sLFh2sj

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— The Nobel Prize (@NobelPrize) October 10, 2022

"This year’s laureates in the Economic Sciences... have significantly improved our understanding of the role of banks in the economy, particularly during financial crises. An important finding in their research is why avoiding bank collapses is vital," the Norwegian Nobel Committee noted.

The work for which Bernanke, Diamond and Dybvig are being recognised has been crucial to subsequent research that has enhanced our understanding of banks, bank regulation, banking crises and how financial crises should be managed, the Committee added.

Notably, Bernake has served as the 14th chairman of the US Federal Reserve from 2006 to 2014. During his tenure, he oversaw the Federal Reserve's response to the late-2000s financial crisis, for which he was named the 2009 Time Person of the Year.  The Committee mentioned that among other things, he showed how bank runs were a decisive factor in the crisis becoming so deep and prolonged.

Moreover, Diamond and Philip Dybvig developed theoretical models that explain why banks exist, how their role in society makes them vulnerable to rumours about their impending collapse and how society can lessen this vulnerability. They presented a solution to bank vulnerability, in the form of deposit insurance from the government. When depositors know that the state has guaranteed their money, they no longer need to rush to the bank as soon as rumours start about a bank run.

The winners will be honoured in Stockholm on December 10 along with the other laureates. The prize consists of a Nobel Prize medal and diploma, and a document confirming the prize amount. The prize amount is set at 10 million Swedish krona ($914,447).

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2021 was divided, one half awarded to David Card "for his empirical contributions to labour economics", the other half jointly to Joshua D. Angrist and Guido W. Imbens "for their methodological contributions to the analysis of causal relationships."

In 2019, Indian-American Abhijit Banerjee, his wife Esther Duflo and Michael Kremer jointly won the 2019 Nobel Economics Prize "for their experimental approach to alleviating global poverty.