In this podcast, ERSA’s host sits down with Prof. Nicola Viegi, the SARB Chair of Monetary Economics from the University of Pretoria, to discuss what this year’s Economics Nobel Prize winners (Ben Bernanke, Douglas Diamond and Philip Dybvig) discovered. As knowledge evolves, this research delves into the role of banks in the economy during a financial crisis, and why it is imperative to prevent a run on the banks. We discuss the two significant contributions made by this research: firstly, codifying the intermediary role of banks and how the value of investments change through time, and secondly showing how this links to the macroeconomic effect of having a financial system – how are banks related to financial cycles? What do these discoveries reveal for financial markets and institutions in emerging markets?
While the Prof reckons that work by Kiyotaki was also a contender for the prize, he acknowledges that apart from the New Keynesian Model, few models are as simple and elegant s that which won the prize. We recommend this podcast for those interested in monetary economics. And should you wish to read the works mentioned, take a look at the additional resources.
by 