The Nobel Prize in economics has been given to Ben Bernanke, the former chairman of the United States Federal Reserve.
Douglas Diamond and Philip Dybvig are joining Bernanke. The Nobel Prize was awarded to three individuals for their contributions to economics, notably in coping with financial crises.
The economists received an accolade from the Royal Swedish Academy of Sciences for their critical work extending back to the 1980s.
According to the school, the three persons were crucial in determining the bank’s survival, and excellent bank administration might assist ease economic downturns and averting financial meltdowns.
Their crucial works
Bernanke conducted a study on the Great Depression. This contributed to his selection as a Nobel laureate. In addition, Bernanke was able to deal with the 2008 global financial crisis because of his competence and knowledge of the field.
“People had seen that banks fail, but it was more thought [of] as a consequence of the crisis rather than [a] cause of the crisis,” said the Nobel Committee, John Hassler.
“Now the views of Bernanke have become the conventional wisdom.”
Meanwhile, Diamond and Dyvbig were recognized for their contributions to the consolidation of the bank’s, borrowers’, and savers’ relationships. These entities’ aims, according to the pair, are interrelated.
Borrowers, for example, want to access cash but pay the total in installments, whilst savers want to retain a reserve fund in case of an emergency. Diamond and Dyvbig agreed that lenders should have a good reputation since it may affect their transactions.
Diamond spoke during a news conference, emphasizing that the rise in interest rates in the United Kingdom showed that the country’s markets were unstable. However, he feels that professionals and economists in the UK have learned enough from the 2008 market catastrophe.
“Recent memories of that crisis and improvements in regulatory policies around the world have left the system much, much less vulnerable,” he said.
The former head of the Fed
Looking more closely at Bernanke’s accomplishments, he previously served as the Fed’s chief from 2006 to 2014.
During his term as head of the agency, he was able to successfully mitigate the ramifications that had a severe impact on the US economy.
Bernanke, as chairman, also initiated a program to acquire assets that may assist boost economic activity. Furthermore, he improved communication between the central bank and the general population.
Bernanke thought that informing the public about the central bank’s intentions and aims would benefit both sides regarding financial management. These tactics have now become the Feds’ established norms.
“There’s a lot of question on … the legal ways the US regulators could have resolved Lehman, and some claim it was essentially impossible for them to do it. But had they found a way I think the world would have had less of a severe crisis than it did,” Diamond added.
Bernanke is currently a senior associate at the Brookings Institution, one of the country’s major think tanks. Diamond and Dyvbig, for their part, are professors at the University of Chicago and Washington University in St. Louis, respectively.
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