A trio of US economists including Former Federal Reserve chief Ben Bernanke won this year's Nobel Economics Prize on Monday for research on how propping up failing banks can stave off an even deeper economic crisis.

Bernanke, along with Douglas Diamond and Philip Dybvig won the 2022 prize for their work starting in the early 1980s that carried practical importance in regulating financial markets and dealing with financial crises.

"Ben Bernanke, Douglas Diamond and Philip Dybvig, have significantly improved our understanding of the role of banks in the economy, particularly during financial crises," the Royal Swedish Academy of Sciences said on Monday.

"An important finding in their research is why avoiding bank collapses is vital," the academy added.

The academy said that Bernanke showed with statistical analysis that bank runs led to bank failures and this was the mechanism that turned a relatively ordinary recession into the depression in the 30s, the world's most dramatic, and, severe crisis

Bank runs can easily become self-fulfilling leading to the collapse of an institution and putting the entire financial sector at risk.

"These dangerous dynamics can be prevented through the government providing deposit insurance and acting as a lender of last resort to banks," the academy said.

The trio join such luminaries as Paul Krugman and Milton Friedman, previous winners of the prize. (Reuters)