Former Federal Reserve Chairman Ben Bernanke and two other American economists won the Nobel Prize in economic sciences on Monday for their work studying bank runs and financial crises.
Bernanke led the Federal Reserve from from 2006 to 2014 under two presidents, including during the 2008 financial crisis, when he directed drops in short-term interest rates to zero and purchases of mortgage-backed investments, which aided the nation’s big banks in maintaining liquidity to avoid a deeper recession.
“We didn’t know it at the time, but 15 years ago, much of the world stood at the brink of a devastating economic crisis,” Tore Ellingsen, chair of the prize’s selection committee, said during the announcement event.
“Most of us were unprepared for it,” he continued. “However, a few academic economists were both prepared and worried. They had studied the theory of bank runs, they believed the evidence in its favor and they suspected that the possibility of runs was yet again becoming relevant.”
The committee officially awarded the prize to the three individuals “for research on banks and financial crises”.
Bernanke, who now works at the Brookings Institution, won the award alongside Douglas Diamond, a University of Chicago professor, and Philip Dybvig, a Washington University in St. Louis professor.
The two professors are known for their Diamond–Dybvig model, which theorizes how financial conditions can give way to bank runs and panic and argues for a government guarantee of deposits.
“The laureates’ insights have improved our ability to avoid both serious crises and expensive bailouts,” Ellingsen said in a statement.
Three scientists won this year’s Nobel Prize in physics for proving tiny parties can maintain a connection even when separated. Three other scientists won the chemistry prize for their work in click and bioorthogonal chemistry.
Swedish scientist Svante Pääbo last week received the prize in medicine for uncovering secrets of Neanderthal DNA. The committee awarded its peace prize to two human rights organizations from Russia and Ukraine as well as an activist in Belarus.
French author Annie Ernaux won the Nobel Prize in literature.
Each prize is worth 10 million Swedish krona, which is equivalent to just under $900,000.