Ben Bernanke, who led the US central bank during the 2008 financial crisis, is one of three recipients of this year’s Nobel prize in economics.
The Royal Swedish Academy of Sciences said it was recognising the trio for research that had changed our understanding of financial crises.
The work focused on the importance of avoiding runs on banks.
The insights have “improved our ability to avoid both serious crises and expensive bailouts”, the academy said.
Bernanke’s research showed how bank runs had prolonged the Great Depression in the 1930s.
He later applied some of those lessons during his time at the US Federal Reserve, which he led from 2006-2014.
When the financial crisis hit, he pushed the Federal Reserve to intervene aggressively, slashing interest rates and helping to organise bailouts of some of America’s biggest banks – moves that were politically controversial.
The tools he deployed were also used by the Fed and other central banks in 2020 to stabilise the economy when the Covid pandemic hit and many countries went into lockdown.
When Mr Bernanke published his work in 1983, bank failures were viewed as a consequence of economic crisis, rather than the cause. His work turned that wisdom on its head.
Mr Bernanke, a long-time professor who is now a senior fellow at the Brookings Institution, said his work looks “primitive” today, but was unusual at the time for arguing that the financial system had a big impact on the rest of the economy.
Mr Bernanke shared the prize with economists Douglas Diamond and Philip Dybvig, who are professors at the University of Chicago and Washington University in St Louis, Missouri respectively.