Faculty of Economics, Administrative and Social Sciences - iisbf@gelisim.edu.tr
International Trade And Finance
19 October 2022 Wednesday
2022 Nobel Prize Winners Announced
The winners of the 2022 Nobel Prize in economics were Ben Bernanke, Douglas W. Diamond and Philip H. Dybvig "for their research on banks and financial crises."
In the work of former US Federal Reserve chief Ben Bernanke and Douglas W. Diamond and Philip H. Dybvig, is pointed out why banks are needed, how banks can be resilient in the face of crises, and how bank collapses play a role in exacerbating financial crises.
The research of three economists points to the consequences of bank runs during the crisis and the vital importance of avoiding bank collapses. For this reason, the analyzes developed by Bernanke, Diamond and Dybvig on the regulation of financial markets and the fight against financial crises attract great attention. In their analysis, it is stated that the healthy functioning of the free market economy will be possible by directing the savings to investments. However, in unexpected crisis situations, the fact that many of the savers want to have instant access to their savings in the banks increases the vulnerability of banks to bankruptcies. As the rumors turn into reality, banks become vulnerable and go bankrupt. When banks fail, society's capacity to transform its savings into productive investments deteriorates significantly.
It is stated that these risks can be avoided by providing deposit insurance by the public and positioning them as the lender of last resort for banks. In this context, it is emphasized that the work of economists reduces the risk of financial crises turning into long-term depressions.
