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11/10/22 07:00 AM IST

Economics Nobel Prize

In News 
  • For significantly improving “our understanding of the role of banks in the economy, particularly during financial crises,” the Sveriges Riksbank Prize in Economic Sciences for 2022 was awarded to three American economists: Ben S Bernanke, Douglas W Diamond and Philip H Dybvi.
About Research 
  • The Economics Prize has gone to the three individuals for their role in research related to how banks function.
  • “Modern banking research clarifies why we have banks, how to make them less vulnerable in crises and how bank collapses exacerbate financial crises.
  • The foundations of this research were laid by Ben Bernanke, Douglas Diamond and Philip Dybvig in the early 1980s.
  • The laureates’ insights have played an important role in ensuring these latter crises did not develop into new depressions with devastating consequences for society. 
Douglas W Diamond and Philip H Dybvi
  • Both Diamond and Dybvig worked together to develop theoretical models explaining why banks exist, how their role in society makes them vulnerable to rumours about their impending collapse, and how society can lessen this vulnerability.
  • These insights “form the foundation of modern bank regulation.
  • The model captures the central mechanisms of banking, as well as its weaknesses.
  • It is based upon households saving some of their income, as well as needing to be able to withdraw their money when they wish.
Source- Indian Express 

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