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by snake_doc
1349 days ago
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The scientific background of this year’s prize cites the work of the 3 economists in the 1980s. > Specifically, Diamond and Dybvig (1983) presented a theory of maturity transformation and showed that an institution using demand deposits to finance long-term projects is the most efficient arrangement, but that, at the same time, this arrangement has an inherent vulnerability: bank runs may arise > Diamond (1984) developed a theory of a bank’s provision of delegated monitoring services and showed that banks can ensure that projects with high (but risky) long-run returns obtain funding by monitoring borrowers on behalf of lenders. > Bernanke (1983) showed, in particular, that the downturn became so deep and so protracted in large part because bank failures destroyed valuable banking relationships, and the resulting credit supply contraction left significant scars in the real economy. https://www.nobelprize.org/uploads/2022/10/advanced-economic... |
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