The winners of the Nobel Prizes, which honor those who serve humanity in the world of science and art, were announced on October 3. The Nobel Committee finally announced the winners of the Nobel Prize in Economics today.

Committee awarded the 2022 Nobel Prize in Economics Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig he deserved. The committee explained that the work of the three names has improved society’s handling of financial crises.

Nobel Prize-winning work by three economists:

According to the statement shared by the commission, three economists why are banks? how they became less vulnerable in a crisis and how bank crashes exacerbated financial crises explained. The team laid the foundations for their work in the 1980s.

According to the study of economists, to make the economy work savings had to be channeled into investments. But that also created a paradox: savers wanted instant access to their money for unexpected expenses, while businesses and homeowners needed to know they didn’t have to pay off their loans early.

‘Banks became bridges between savers and entrepreneurs’

Diamond and Dybvig showed in their theory how banks offer an optimal solution for this problem. Accordingly, banks can act as intermediaries accepting deposits from many depositors, allowing depositors to access their funds at any time while also offering long-term loans to borrowers.

On the other hand, the survey found that these two banking activities also make banks vulnerable to collapse. Multiple savers to withdraw their money at the same time when he applied to the bank, the bank could collapse. This situation could have been prevented by the government providing deposit insurance and acting as a last resort for the banks.

Diamond also revealed how banks fulfill another socially important function in the study. As an intermediary between many savers and borrowers, banks were therefore better suited to assess the creditworthiness of borrowers and ensure that loans are used for sound investments.

Ben Bernanke, the worst economic crisis in modern history He analyzed the Great Depression of the 1930s. Bernanke showed how bank fraud played a role in deepening and prolonging the crisis. When banks collapsed, valuable information about borrowers was lost and could not be quickly reconstructed. Society’s tendency to channel savings into productive investments has therefore been greatly reduced.