On Monday, the Royal Swedish Academy of Sciences decided to award the 2022 Nobel Prize in Economics to Ben Bernanke, Douglas Diamond, and Philip Dybvig "for research on banks and financial crises."
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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," the academy said in a statement. "An important finding in their research is why avoiding bank collapses is vital."
The foundations of modern banking research were laid in the early 1980s by the laureates, whose analyses have been "of great practical importance in regulating financial markets and dealing with financial crises," the statement said.
"The laureates' insights have improved our ability to avoid both serious crises and expensive bailouts," Tore Ellingsen, Chair of the Committee for the Prize in Economic Sciences, said.
In a telephone interview onsite, Diamond said the news "did come as a surprise." Talking about the current situation, he said "we are certainly much better prepared today, compared with the 2008 financial crisis."
He said that financial crises become worse when people lose faith in the financial system, and that banks should be prepared to make the financial sector stable.
Bernanke is Distinguished Senior Fellow of economic studies at the Brookings Institution. Diamond is Merton H. Miller Distinguished Service Professor of Finance at University of Chicago Booth School of Business. Dybvig is Boatmen's Bancshares Professor of Banking and Finance at Washington University in St. Louis, Olin Business School.