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Ben Bernanke, former US Federal Reserve chief, wins Nobel Prize Ben Bernanke, former US Federal Reserve chief, wins Nobel Prize
(about 2 hours 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 Royal Swedish Academy of Sciences said it was recognising the trio for research that had changed our understanding of financial crises.
He shared the prize with economists Douglas Diamond and Philip Dybvig. The work focused on the importance of avoiding runs on banks.
The Nobel Foundation said their research had "improved our ability to avoid both serious crises and expensive bailouts". The insights have "improved our ability to avoid both serious crises and expensive bailouts", the academy said.
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.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.
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. When the financial crisis hit, he pushed the Federal Reserve to intervene aggressively, slashing interest rates and helping to 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 tools he deployed 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." "The laureates have provided a foundation for our modern understanding of why banks are needed, why they are vulnerable and what to do about it," said Stockholm University economist John Hassler, a member of the prize committee. "We can also note that even though the financial crisis had large consequences, neither that, nor the Covid pandemic, led to depressions 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.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". What 2008 recession can teach us about the Covid shock
Prof Diamond, who teaches at the University of Chicago, said the world is much better prepared for financial crises than it was in 2008. How Bernanke weathered 2008 storm
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. Mr Bernanke shares the prize with economists Douglas Diamond and Philip Dybvig.
Their work showed the vital role banks play in the economy and how regulation, such as deposit insurance, can make banks less vulnerable to collapse, insights that the committee said "form the foundation of modern banking regulation".
Understanding financial crises remains a "first-order priority", Prof Hassler said in awarding the prize, which comes at a time of heightened global economic uncertainty.
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 2022 Nobel prize in economics went to economists Ben Bernanke, Philip Dybvig and Douglas Diamond (above)
"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."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.
The award comes with 10 million Swedish crown ($885,000) in prize money, which will be split three ways.
Prof Diamond said the recognition came as a surprise and that he had been "sleeping very soundly" when his mobile rang, informing him of his win.
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.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 other Nobel prizes were established by Alfred Nobel's will in 1895, while 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.
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. Previous winners, the majority of whom have been from the US, include Paul Krugman and Milton Friedman. It is unusual for the prize to go to a prominent policymaker.
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.
Prof Dybvig is a professor at Washington University in St Louis, Missouri.