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The Nobel Prize in Economics goes to prosperity researchers

Darren Acemoglu, Simon Johnson and James A. Robinson received this year’s Nobel Prize in Economic Sciences for their contributions to proving the importance of public institutions to a country’s prosperity.

KEY FACTS

  • The prestigious prize, officially known as the Sveriges Riksbank Prize for Economic Sciences in Memory of Alfred Nobel, is the last prize awarded this year and is worth SEK 11 million ($1.1 million).
  • This year’s laureates showed that one of the explanations for differences in countries’ prosperity is the social institutions introduced during European colonization. Inclusive institutions were often introduced in countries that were poor at the time of colonization, which over time led to general prosperity for the population. This is an important reason why former colonies that were once rich are now poor and vice versa.
  • Introducing inclusive institutions would create long-term benefits for everyone, but extractive institutions provide short-term gains for those in power. As long as the political system ensures they retain their control, no one will trust their promises of future economic reforms. According to the laureates, this is the reason why there is no improvement.
  • “Reducing the huge income gaps between countries is one of the greatest challenges of our time. The laureates have demonstrated the importance of public institutions in achieving this,” said Jakob Svensson, Chairman of the Economic Sciences Prize Committee.
  • “Societies with poor rule of law and institutions that exploit the population do not generate growth or change for the better,” the prize’s organizers add on their website.

TANGENT

Darren Acemoglu and Simon Johnson work at MIT, while James Robinson is at the University of Chicago.

Acemoglu and Johnson recently collaborated on a book researching technology through the ages that demonstrates how some technological advances are better at creating jobs and spreading wealth than others.

KEY STORY

The Economics Prize is not one of the original science, literature and peace prizes created by the will of dynamite inventor and businessman Alfred Nobel and first awarded in 1901, but is a later additional prize established and funded by the Central Bank of Sweden in 1968.

Past recipients of the award include a number of influential thinkers such as Milton Friedman, and John Nash – played by actor Russell Crowe in the 2001 film A Beautiful Mind, and former US Federal Reserve Chairman Ben Bernanke.

Last year, Harvard economic historian Claudia Goldin won a prize for her work highlighting the causes of pay and labor market inequality between men and women.

Cyprus Banks Offer Low Deposit Returns Despite High Liquidity, CBC Data Shows

Banks in Cyprus continue to offer some of the eurozone’s lowest deposit rates despite holding substantial liquidity, while borrowing costs remain broadly in line with European levels. New figures from the Central Bank of Cyprus (CBC) show that interest-rate changes are being passed on to borrowers more readily than to savers.

September brought some improvement in deposit returns, but Cyprus remained near the bottom of the eurozone rankings.

Deposit Rates Rise But Remain Among The Lowest

The average rate on new household deposits with an agreed maturity of up to one year increased to 1.62% in September 2026, from 1.35% in August. For non-financial corporations, the rate rose to 1.70%, compared with 1.56% a month earlier.

Despite the increases, the CBC said rates on both new and outstanding deposits remained among the lowest in the eurozone. The transmission of market-rate changes to depositors was also weaker in Cyprus than in almost all other member states.

One factor is the high liquidity held by local banks. Cyprus’s Liquidity Coverage Ratio reached 305% in September 2026, compared with an EU median of 182% and an average of 158% in June, the latest available comparison cited by the CBC. The relatively short maturity profile of the banking sector may also contribute.

High liquidity has therefore not translated into more competitive returns for savers, raising questions about how strongly banks compete for deposits and how quickly they pass on changes in market rates.

Borrowing Costs Remain Close To Eurozone Levels

Interest rates on new household loans declined in September. Housing loan rates fell to 3.88%, from 4.16% in August, while consumer credit rates dropped to 6.45%, from 7.12%.

Business borrowing moved in the opposite direction. Rates on new loans of up to €1 million to non-financial corporations increased to 4.76%, from 4.45%. For loans above €1 million, the average rose to 4.40%, compared with 3.67%.

Despite these monthly movements, lending rates in Cyprus remained broadly comparable with eurozone levels. Rates on outstanding household loans were 0.1 percentage points below the eurozone median, while those for businesses were 0.3 points higher. For new lending, housing loan rates were 0.2 points below the median and business loan rates 0.3 points above it.

The CBC also found that monetary policy changes were reflected in outstanding lending rates broadly in line with developments elsewhere in the eurozone. Between June 2024 and August 2026, lending rates declined during the monetary easing period. For new business loans, the pass-through of rate cuts was stronger in Cyprus than the pass-through of earlier rate increases.

New Lending Nearly Doubles

New lending increased sharply in September. Pure new loans reached €596.2 million, compared with €251.4 million in August. Including other categories, total new lending rose to €896.8 million from €390.1 million.

Pure new housing loans increased to €135.1 million from €114.4 million, while consumer lending rose to €32.2 million from €19.3 million.

Business lending recorded the strongest movement. Pure new loans of up to €1 million reached €45.4 million, compared with €35.5 million in August. For loans above €1 million, new lending surged to €376.7 million from €77 million.

Borrowers Shift Away From Floating Rates

The CBC report also highlights a significant change in borrowers’ interest-rate preferences.

The share of new household housing loans with variable rates fell from nearly 100% at the beginning of 2022 to 9.8% in September 2026, below the eurozone median. The CBC suggested that some borrowers may initially have chosen fixed-rate loans with terms of three to five years, which later convert to floating rates.

Across new lending to households and non-financial corporations, the proportion of loans carrying floating rates also declined, from almost 100% in early 2022 to 73.8%. This remained slightly above the eurozone median.

The central bank said these changes in borrower preferences should be considered by banks when developing their risk-management policies.

The Gap Between Deposit And Lending Rates

September’s figures present a mixed picture. Deposit returns improved, while households benefited from lower rates on new housing and consumer loans. However, savers in Cyprus continue to receive comparatively low returns, despite the banking sector’s substantial liquidity.

The figures highlight an imbalance in how market-rate changes reach customers. While borrowing costs remain broadly aligned with eurozone levels, deposit rates have been slower to respond, leaving households and businesses with limited returns on their savings.

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