The Prize in Economic Sciences 2022 – Press release

Claims Supported by This Source

1. The 2022 prize went to Ben S. Bernanke, Douglas W. Diamond, and Philip H. Dybvig (for research on banks and financial crises).
2. Depositors want to be able to withdraw their money at any time, while borrowers do not want to be forced to repay loans prematurely. Banks reconcile these needs by taking deposits from many savers and lending them out long-term.
3. This combination makes banks vulnerable to rumors that they are about to fail. If many depositors rush to withdraw their money at the same time, the rumor becomes a self-fulfilling prophecy, a bank run occurs, and the bank collapses.
4. This danger can be prevented by government deposit insurance and by the central bank acting as a lender of last resort.
5. Bernanke showed that bank runs were a decisive factor that deepened and prolonged the Great Depression of the 1930s. When banks collapse, information about borrowers is lost and cannot be quickly recreated.

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