2022 Nobel Prize Winners Announced

The winners of the Nobel Prizes, which honor those who serve humanity in the world of science and art, have started to be announced as of October 3. The Nobel Committee has finally announced the winners of the Nobel Prize in Economics today.

Committee awarded the 2022 Nobel Prize in Economics Ben S. Bernanke, Douglas W. Diamond, and Philip H. Dybvig he deserved. The committee explained that the work of the three names improved the way society copes with financial crises.

Nobel-winning work by three economists:

According to the statement shared by the committee, three economists why are banks how they became less vulnerable in crisis and how bank crashes exacerbated financial crises explained. The team laid the foundations for their work in the 1980s.

According to the study of economists, for the economy to work savings had to be channeled into investments. But this also created a paradox: savers wanted to have instant access to their money in case of unexpected expenses, while businesses and homeowners had to know they wouldn’t have to pay off their loans early.

“Banks became a bridge between savers and entrepreneurs”

Diamond and Dybvig showed in their theory how banks offer an optimal solution to this problem. Accordingly, banks act as intermediaries accepting deposits from many savers, allowing depositors to access their money at any time, while also offering long-term loans to borrowers.

On the other hand, the study revealed that these two activities of banks also make banks vulnerable to collapses. Multiple savers to withdraw their money at the same time when he applied to the bank, the bank could collapse. This situation could have been avoided by the government providing deposit insurance and acting as the lender of last resort to the banks.

Diamond also revealed how banks fulfill another socially important function in the study. Accordingly, as intermediaries between many savers and borrowers, banks were better suited to assess the creditworthiness of borrowers and ensure that loans are used for good investments.

Ben Bernanke, the worst economic crisis in modern history He analyzed the Great Depression of the 1930s. Bernanke showed how bank fraud played a role in the deepening and prolongation of the crisis. When banks collapsed, valuable information about borrowers was lost and could not be quickly reconstructed. Society’s propensity to channel savings into productive investments has therefore been seriously reduced.