Former Fed Chairman Ben Bernanke and 2 US-based economists split Nobel Prize in Economics – NBC Connecticut
This year’s Nobel Prize in Economics was awarded to former US Federal Reserve Chairman Ben S. Bernanke and two US economists, Douglas W. Diamond and Philip H. Dybvig, “for their research on banks and financial crises.”
The prize was announced by the Nobel panel at the Royal Swedish Academy of Sciences in Stockholm on Monday.
The committee said their work had shown in their research “why avoiding bank meltdowns is vital”.
With their research in the early 1980s, the laureates laid the foundations for the regulation of financial markets and the management of financial crises, the panel said.
Bernanke, 68, who is now at the Brookings Institution in Washington, DC, examined the Great Depression of the 1930s, showing how dangerous banks – when panicked savers withdrawing their deposits – can be.
Diamond, 68, based at the University of Chicago, and Dybvig, 67, who is at Washington University in St. Louis, showed how government guarantees on deposits can prevent a spiral of financial crises.
“The winners’ ideas have improved our ability to avoid both severe crises and costly bailouts,” said Tore Ellingsen, chair of the Economics Prize Committee.
Their research took on real-world significance when investors panicked the financial system in the fall of 2008.
Bernanke, then Fed chief, teamed up with the Treasury Department to support big banks and ease the credit crunch, the engine of the economy.
He cut short-term interest rates to zero, led the Fed’s purchases of Treasuries and mortgage investments, and implemented unprecedented lending programs. Collectively, these measures have calmed investors and strengthened the big banks.
They also pushed long-term interest rates to historic lows and drew strong criticism of Bernanke, particularly from some 2012 Republican presidential candidates who said the Fed was hurting to the value of the dollar and risked triggering inflation later.
The Fed’s actions under Bernanke have extended central bank authority into unprecedented territory. They couldn’t prevent the longest and most painful recession since the 1930s. But in hindsight, the Fed’s actions have been credited with saving the banking system and averting another depression.
The Nobel Prizes carry a cash prize of 10 million Swedish crowns (nearly $900,000) and will be awarded on December 10.
Unlike other prizes, the Economics Prize was not created in Alfred Nobel’s will of 1895 but by the Swedish central bank in his memory. The first winner was selected in 1969.
Last year, half of the prize went to David Card for his research on the impact of minimum wage, immigration and education on the labor market. The other half was shared by Joshua Angrist and Guido Imbens for coming up with how to study problems that don’t easily fit traditional scientific methods.
A week of Nobel Prize announcements kicked off on October 3 with Swedish scientist Svante Paabo receiving the medicine prize for unlocking the secrets of Neanderthal DNA that provided key insights into our immune system.
Three scientists jointly won the physics prize on Tuesday. Frenchman Alain Aspect, American John F. Clauser and Austrian Anton Zeilinger had shown that tiny particles can maintain a connection with each other even when separated, a phenomenon known as quantum entanglement. , which can be used for specialized computing and to encrypt information.
The Nobel Prize in Chemistry was awarded on Wednesday to Americans Carolyn R. Bertozzi and K. Barry Sharpless, along with Danish scientist Morten Meldal, for developing a way to “glue molecules together” that can be used to explore cells , map DNA and design drugs that can more precisely target diseases like cancer.
French writer Annie Ernaux won the Nobel Prize for Literature on Thursday. The jury praised her for blending fiction and autobiography in books that fearlessly tap into her experiences as a working-class woman to explore life in France since the 1940s.
The Nobel Peace Prize was awarded on Friday to imprisoned Belarusian human rights activist Ales Bialiatski, the Russian group Memorial and the Ukrainian organization Center for Civil Liberties.
The prize was awarded to people who are making a difference in Belarus, Russia and Ukraine.