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Ben Bernanke, former US Federal Reserve chief, wins Nobel Prize Ben Bernanke, former US Federal Reserve chief, wins Nobel Prize
(31 minutes later)
Ben Bernanke, who led the US central bank during the 2008 financial crisis, is one of three recipients of this year's Nobel prize in economics.Ben Bernanke, who led the US central bank during the 2008 financial crisis, is one of three recipients of this year's Nobel prize in economics.
The Nobel Foundation chose to recognise work by Mr Bernanke about the importance of preventing runs on banks.The Nobel Foundation chose to recognise work by Mr Bernanke about the importance of preventing runs on banks.
He shared the prize with economists Douglas Diamond and Philip Hybvig. He shared the prize with economists Douglas Diamond and Philip Dybvig.
The Nobel Foundation said their research had "improved our ability to avoid both serious crises and expensive bailouts".The Nobel Foundation said their research had "improved our ability to avoid both serious crises and expensive bailouts".
Mr Bernanke's research showed how bank runs had prolonged the Great Depression in the 1930s. Mr Bernanke's research showed how bank runs had prolonged the Great Depression in the 1930s. He later applied some of those lessons during his time at the US Federal Reserve, which he led from 2006-2014.
He later applied some of those lessons during his time at the US Federal Reserve, which he led from 2006-2014. During his time as chairman, the Fed intervened aggressively in the economy, slashing interest rates and helping to organise bailouts of some of America's biggest banks - moves that were politically controversial.
Under his leadership, the Fed helped organise bailouts of some of America's biggest banks, moves that were politically controversial. The tools he deployed during the 2008 financial crisis were also used by the Fed and other central banks in 2020 to stabilise the economy when the Covid pandemic hit and many countries went into lockdown.
"The measures that were undertaken rest on the ideas that we recognise today," said Stockholm University economist John Hassler, a member of the committee. "We can also note that even though the financial crisis had large consequences, neither that nor the Covid pandemic led to depression like in the 30s."
When Mr Bernanke published his work in 1983, bank failures were viewed as a consequence of economic crisis, rather than the cause. His work turned that wisdom on its head.
The research by Prof Diamond and Prof Dybvig showed the vital role banks play in the economy and how regulation, like deposit insurance, can make them less vulnerable to collapse, insights that the committee said "form the foundation of modern banking regulation".
Prof Diamond, who teaches at the University of Chicago, said the world is much better prepared for financial crises than it was in 2008.
But he said unexpected events, like the surge in borrowing costs that hit the UK last month after the government unveiled plans for tax cuts, still pose risks, especially if people lose faith in the credibility of the system.
"The best advice is to be prepared for making sure that your part of the banking sector is both perceived to be healthy and to stay healthy and respond in a measured and transparent way to changes in monetary policy," he said.
Although not one of the original Nobel Prizes, the economics award is administered by the Nobel Foundation and is the last to be announced each year.
The other Nobel prizes were established by Alfred Nobel's will in 1895.
The economics prize, officially known as the Sveriges Riksbank (Sweden's central bank) Prize in Economic Sciences in Memory of Alfred Nobel, was created in 1968.
Mr Bernanke, who earned his undergraduate degree at Harvard and doctorate from MIT, previously worked as a professor of economics at Princeton and other universities. He also served as an advisor to former president George W Bush.Mr Bernanke, who earned his undergraduate degree at Harvard and doctorate from MIT, previously worked as a professor of economics at Princeton and other universities. He also served as an advisor to former president George W Bush.
He is now a senior fellow at the Brookings Institution.He is now a senior fellow at the Brookings Institution.