Three researchers from US universities, including former US Federal Reserve Chairman Ben Bernanke, won this year’s Nobel Prize in Economics, for their contribution to finding ways to avoid and manage crises in the financial system, such as what happened in 2008.
The prize, officially designated the Bank of Sweden Prize for Economic Sciences in memory of Alfred Nobel, was awarded on Monday to Ben Bernanke, Douglas Diamond and Philip Dibweg. “[Os laureados] Significantly improved our understanding of the role of banks in the economy, particularly during financial crises, as well as how financial markets are regulated. Swedish Academy.
Ben Bernanke was chairman of the US Federal Reserve when the international financial system plunged into a major crisis following the collapse of investment bank Lehman Prothes in 2008.
However, it was not for the role he played during this crisis that the American economist was awarded the Nobel Prize on Monday. Before taking up his duties at the Federal Reserve, Bernanke devoted himself, as an academic, to investigating financial crises such as the Great Depression of the 1930s. He accompanied the award announcement.
“It showed, among other things, how critical bank inflows were in making this crisis deep and protracted,” says the memo about Bernanke, now a fellow at the Brookings Institution.
When Ben Bernanke analyzed what happened during the Great Depression of the 1930s, the most common idea among economists was that the problem was that the central bank was not pumping enough liquidity into the economy. Bernanke agreed with this analysis, but said that the explanation for the extraordinary size and duration of the crisis lay in another factor: the successive banking failures that prevented the financial system, for a long period of time, from playing its part in diverting the savings of economic agents into investment. Rather than arguing that it was the economic crisis that led to the failure of banks, he argued that bankruptcies were the cause of the depth and length of the crisis.
“Using historical sources and scientific methods, Bernanke’s analysis demonstrated the factors that were important to the decline in GDP. It concluded that factors directly related to bank failures contributed the lion’s share of the recession,” say members of the Academy.
Also in the 1980s, Douglas Diamond of the University of Chicago and Philip Depwig of Washington University in St. Lewis, other Nobel laureates have devoted themselves to studying ways to avoid that, in times of economic crisis, there is a wave of bank failures that make problems in the economy more serious.
The academy says that economists have “developed theoretical models that explain why banks exist, how their roles in society make them vulnerable to rumors about their collapse and how society can reduce these weaknesses.”
One of the solutions offered by Douglas Diamond and Philip Dipvig is now used in practice in a large number of countries, including Portugal: the state has introduced mechanisms to guarantee bank deposits, making savers confident that up to a certain amount the state protects their money, and does not feel the urgent need to withdraw their deposits Once they heard rumors that their bank had failed.
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