NUNZIUM

Ben Bernanke (USA, 68), Douglas Diamond (DK, 68), and Philip Dybvig (USA, 67) are the winners of the Nobel Prize in Economic Sciences 2022, awarded “for research on banks and financial crises”. Their research shed light on the significant role of banks in the economy, particularly during financial crises. An important finding in their research is why avoiding bank collapses is vital to avoid escalating consequences during crises. They have analyzed in detail the weakness of banks when rumors of imminent collapse spread: If a large number of savers simultaneously run to the bank to withdraw their money, the rumor may become a self-fulfilling prophecy – a bank run occurs and the bank collapses. These dangerous dynamics can be prevented through the government providing deposit insurance and acting as a lender of last resort to banks. Ben Bernanke analyzed the Great Depression of the 1930s, the worst economic crisis in modern history. Among other things, he showed how bank runs were a decisive factor in the crisis becoming so deep and prolonged. When the banks collapsed, valuable information about borrowers was lost and could not be recreated quickly. Overall, their work was crucial for the implementation of the modern defense mechanisms enacted during the financial crisis.