University of Leicester eBulletin

Finance and Economy - The Role of the State

October 2002
No 229

The pivotal role finance plays in the economy of the country will come under scrutiny in a University of Leicester Inaugural Lecture on Tuesday 19 November 2002 at 5.30 pm.

Professor Panicos O Demetriades, Professor of Financial Economics and Head of the Department of Economics at the University, will speak on Financial Systems and Economic Performance: The Role of the State.

While a stable, well-functioning, financial system can contribute positively to investment, economic growth and employment, a poorly functioning financial system can waste resources, discourage saving and encourage speculation, resulting in under-investment and a misallocation of scarce resources.

Recent financial crises have vividly demonstrated how large the adverse effects of malfunctioning financial systems can be, not only for the countries affected but also for the rest of the world economy.

Professor Demetriades commented: “It is widely accepted that the state can play a critical role in ensuring financial stability, even though views on the extent and nature of its involvement have varied considerably across countries and over time.

“The traditional neo-liberal approach to finance, which advocates financial liberalisation without paying adequate attention to financial market imperfections, is now commonly believed to have been flawed and is considered responsible for many of the financial crises observed in the last three decades.

“The New Keynesian view of finance, which recognises the abundance and severity of market failures in the financial system, is believed to provide a more appropriate framework for thinking about government policy towards finance.

“An important policy implication of this approach is that the destabilising effects of financial financial (and other) market failures are sufficiently strong.”

Professor Demetriades worked at the Central Bank of Cyprus, before coming to the UK as a Lecturer and later Reader in Economics at Keele University. He moved to South Bank University as Professor of Financial Economics, a post he has subsequently held at the University of Leicester since 2000. 

He has also been consultant to the World Bank in the Office of the former Chief Economist and Senior Vice-President (Development Economics), Joseph Stiglitz, and Speaker at the World Bank Institute, where he gave seminars at New Delhi, Abidjan and Beirut.

He has published numerous articles on monetary and financial economics in leading academic journals, including Review of Economics and Statistics, The Economic Journal,  Journal of International Economics, Journal of Development Economics, Journal of Money, Credit and Banking.

His research has attracted major funding from the Economic and Social Research Council, the Leverhulme Trust and the Nuffield Foundation. His current research is on State Banks, Institutions and Financial Development. His monograph, Financial Systems and Economic Performance, is shortly to be published by Cambridge University Press.

Professor Demetriades’ Inaugural Lecture, entitled Financial Systems and Economic Performance: The Role of the State, will take place on Tuesday 19 November 2002 at 5.30 pm in Lecture Theatre 1 in the Ken Edwards Building, at the University of Leicester main campus, University Road, Leicester. It is open to the public and free of charge. 

Note to editors:  Further information is available from Professor Panicos O Demetriades, Professor of Financial Economics and Head of Department of Economics, University of Leicester, telephone 0116 252 2835, facsimile 0116 252 2908, email

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