Bernanke, Diamond and Dibvig “have greatly improved our understanding of the role of banks in the economy, especially during financial crises, as well as how to regulate financial markets,” the academy stressed.
“An important conclusion of their research is why avoiding a bank collapse is critical,” the academy said in a statement.
He says that with their research in the early 1980s, the winners laid the foundation for financial market regulation and financial crisis resolution.
68-year-old Bernanke was the head of the US central bank – the Federal Reserve System – from 2006 to 2014. He is currently a researcher at the Brookings Institution. He studied the Great Depression of the 1930s, showing how dangerous the situation can be if depositors withdraw money from banks en masse.
Diamond, 68, is a professor at the University of Chicago and Dybvig, 67, a professor at Washington University in St. Louis. Their research has shown that state deposit guarantees can prevent the rapid development of financial crises.
“The victors’ findings have improved our ability to avoid both major crises and costly financial bailout measures,” the academy stressed.
The amount of the award is SEK 10 million (approximately € 920,000). It will be split equally between all three winners.
The rest of this year’s Nobel Prize winners were announced last week.
Last year, the Nobel Prize in Economics was awarded to US scientists David Card, Joshua Angrist and Guido Imbens for their research in labor economics and causation analysis.
