Raghuram Rajan Praises Nobel Economics Prize Winner Douglas Diamond's Work

Professor Douglas W Diamond from the University of Chicago was awarded the Nobel Prize in Economics 2022 for research on banks and financial crises on Monday. He shared the award with two other economists - former Fed Reserve chairman Ben Bernanke and Philip H. Dybvig of Washington University.

Highlighting Mr Diamond's exceptional work, economist and former Reserve Bank of India Governor Raghuram Rajan wrote an article for his "co-author, colleague, and friend".

Raghuram Rajan, calling Mr Diamond the "father of modern banking theory", wrote in a journal that Douglas Diamond's 1983 work with Philip Dybvig helped understand how banks' important value exposes them to "depositor runs". Mr Rajan shared that he has known Douglas Diamond since 1991. "For me, Doug embodies the ideal university professor, and he has been a mentor and a friend since the day I interviewed with him (and Rob Vishny) for a position at Chicago," he added. The former RBI Governor also wrote about Douglas' 1984 research on delegated monitoring, where he explained how banks save on the cost of monitoring firms. According to Mr Rajan, the Nobel Laureate offered a "simple but illuminating" explanation that inspired further work and research in that area. Mr Rajan added that the insights of Diamond's work also impacted Ben Bernanke, who said that "Diamond-Dybvig was required reading as the Fed grappled with the financial crisis in 2007-2009". Touching on the personal life of Douglas Diamond, Mr Rajan wrote that the Nobel laureate is a quick learner and a very kind and modest person. He added that the professor also has a "wicked sense of humour" and holds great knowledge of various subjects.