Expert lauds Nobel laureates' research on financial system in crises

Ljubljana, 10 October - The latest winners of the Nobel Memorial Prize in Economic Sciences have made a key contribution to understanding the role of the financial system in crises, said Slovenian economist Igor Masten as he responded to Monday's announcement of the laureates.

This year's Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, as is the official name of the prize, went to Ben S. Bernanke, the chairman of the US Federal Reserve in 2006-2014, and two other US-based economists Douglas W. Diamond and Philip H. Dybvig, for their research on banks and financial crises, the Royal Swedish Academy of Sciences said.

Their work is not particularly linked to current developments in the global economy. Rather, it is an acknowledgement of all that the world has experienced during the global financial crisis in 2007-2008 and, later, during the Covid crisis, Masten told the STA.

Their research, which started in the early 1980s, has greatly influenced approaches to monetary policy and shaped the understanding of the nature of crises.

"All three authors have made a key contribution to our understanding of how the financial system contributes to the spread of financial shocks or crises in the economy. Deep and prolonged recessions can occur," Masten said.

He noted that the laureates' findings had helped central banks to quickly stabilise the banking and winder financial sector both during the financial crisis and Covid crisis.

Bernanke, who chaired the US Federal Reserve during the financial crisis, is now with the Brookings Institution, one of the oldest think-tanks in the US. Diamond and Dybvig are professors at the University of Chicago and the Washington University in Missouri, respectively.