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Former Federal Reserve Chairman Ben Bernanke was among a trio of US-based economists who have been awarded the 2022 Nobel Prize in Economic Sciences, the Royal Swedish Academy of Sciences, honored for their research on financial crises and their role, announced on Monday became banks.

Important facts

Bernanke, who now works at the Brookings Institution in Washington, DC, shared the award with economists Douglas Diamond and Philip Dybvig, who work at the University of Chicago and Washington University in St. Louis, respectively.

The awards committee said the trio “significantly enhanced our understanding of the role of banks in the economy, particularly during financial crises.”

Bernanke, who served as Federal Reserve Chairman from 2006 to 2014, was recognized for his analysis of the Great Depression, which the committee called “the worst economic crisis in modern history.”

His work clarified how bank runs, rather than being a mere product of the financial crisis, can actually deepen and prolong the crisis, the committee said.

Diamond and Dybvig were known for their work showing that banks’ intermediary role between borrowers and savers makes them vulnerable to rumors of collapse and subsequent runs.

Diamond has also been credited for his work documenting how banks collate socially valuable information about borrowers that is lost in a collapse.