One of three people to receive this year’s Nobel Prize in economics is Ben Bernanke, who served as the head of the US central bank throughout the financial crisis of 2008.Â
The trio has been honored for their research, according to the Royal Swedish Academy of Sciences, which has altered how we perceive financial crises.
The significance of preventing bank runs was the main topic of the work.
According to the academy, the discoveries have “enhanced our ability to prevent both catastrophic crises and expensive bailouts.”
According to Mr. Bernanke’s research, bank runs in the 1930s contributed to the extension of the Great Depression. Later on, while leading the US Federal Reserve from 2006 to 2014, he used some of those lessons.
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 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 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.
