Lucas Papademos: Education, financial markets and economic growth

Speech by Mr Lucas Papademos (Λουκάς Παπαδήμος), Vice-President of the European Central Bank, at the 35th Economics Conference on “Human Capital and Economic Growth” organised by the Austrian National Bank, Vienna, 21 May 2007. free e books

I. Introduction
“Upon the education of the people of this country the fate of this country depends”, British Prime Minister Benjamin Disraeli observed over 100 years ago with great prescience. Today, his insightful observation about the crucial importance of education and human capital for the welfare of countries and the performance of their economies is widely recognised, especially in all advanced countries with their increasingly knowledge-based economies. In Europe, the Lisbon strategy has placed education
high on the policy agenda – together with some key structural reforms in product, labour and capital markets – in order to make Europe a more competitive, knowledge-based and dynamic economy. It is, therefore, highly appropriate and very much appreciated that the Österreichische Nationalbank has devoted its 35th Economics Conference to the topic of “Human capital and economic growth”, and I am delighted to have been invited to address this distinguished audience.
Education contributes significantly to economic growth and welfare through various channels and in
many ways. [SLIDE 2] In the first part of my presentation, I will review these channels and assess their
relative importance on the basis of the available empirical evidence about the quantitative significance
of the effects of education on a number of key determining factors of growth. In particular, I will
examine the role of education in accounting for differences in economic growth across countries and regions, as well as for the growth performance of different sectors within our economies. In the second part of my speech, I will address the role of the financial sector in fostering economic growth, concentrating on how the development, efficiency and stability of financial markets can contribute to
the dynamism and growth of other sectors and of the economy as a whole. I will then explore how education, research and the diffusion of knowledge have supported and facilitated the development of financial markets; and how education can further contribute to fully realising the benefits of financial innovation, thereby supporting through this channel, our economies’ growth performance. Finally, I will draw some conclusions regarding the implications of our analysis for public policy and for the effectiveness of monetary policy. free e books