Business & Management Studies

This year’s Economics Nobel prize for research about the 1930s holds key lessons for current crisis

This year’s Economics Nobel prize for research about the 1930s holds key lessons for current crisis

The insights offered by these economists played a significant role in helping develop an understanding of the role banks play in the economy, which are critical in the context of today’s global economic landscape.

Author

Deepanshu Mohan, Associate Professor of Economics and Director, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University, Sonipat, Haryana, India.

Summary

The research projects for which Ben Bernanke and the team of Douglas Diamond and Philip Dybvig were awarded this year’s Nobel Prize in economics originated in the early 1980s. They were motivated by the experiences of the banking sector during the Great Depression that started in 1929.

The insights offered by these economists played a significant role in helping develop an understanding of the role banks play in the economy, which are critical in the context of today’s global economic landscape.

Diamond and Dybvig developed theoretical models to explore the role of banks and why they are vulnerable to crises. Bernanke addressed the same questions. He would go on to become chairman of the US Federal Reserve from 2006-2014, when the US experienced a period of severe crisis – its worst since the Great Depression.

Today, most nations are still struggling with Covid-wrung economies that caused supply-chain disruptions. They are suffering from high inflation, a high fiscal deficit due to excessive spending during the shutdowns to prevent the spread of the coronovirus, macroeconomic imbalances resulting from a deeply polarised political landscape, and a war.

Published in: Scroll.in

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