of selected euro area countries. omt has worked and remarkably, there has so far not been any need to activate the program. rajan, r. ( 2013 ), a step in the dark : unconventional monetary policy after the crisis. andrew crockett memorial lecture, bis, 23 june 2013. speech by mario draghi, president of the european central bank at the global investment conference in london 26 july 2012 ( www. ecb. europa. eu / press / key / date / 2012 / html / sp120726. en. html ). bis central bankers ’ speeches finance and growth thinking with hindsight about the causes and possible early indicators of the financial crises, one thing seems clear. the financial sector, including banks, grew to a very large scale in many countries. recent research suggests that when the financial sector grows rapidly into large proportions, the risk of a serious crisis is heightened. 3 [ figure 2 : rapid growth in the eu banking sector pre - crisis ] before the crisis, the consensus view from the finance and growth literature was that financial development not only follows economic growth but contributes to it. however, after the financial crisis, the darker side of the financial sector growth has received increasing attention. the traditional benign view of finance and growth is that a growing financial sector improves overall economic growth opportunities by mobilizing resources to finance investment projects and by facilitating risk management. the key assumption is that a well - developed financial system helps allocate productive resources more efficiently, both by channeling funds to growth sectors and by pulling resources from declining ones. correspondingly, research has argued that low financial development could be a factor which reduces long - run growth and also increases growth volatility. 4 however, some recent research by cecchetti and kharroubi at the bis suggests that while finance does contribute to economic growth, it does so only up to a point. 5 [ figure 3 : finance and growth ] at the level of individual financial institutions, the growth of bank balance sheets was seen as reflecting increasing returns to scale and scope from combining a wide variety of financial services and providing them also cross - border to internationally active clients. technological development and financial innovation enabled the creation of totally new products. these were initially seen as filling gaps in the palette of risk management products and creating totally new segments of the financial markets. 6 today we know that many of the new exciting risk management products increase rather than reduce risk, when applied inappropriately. moreover, the changing

the rest of the world. germany ’ s gdp fell by 3. 8 % in the first quarter of this year, and the bundesbank predicts a fall of 6. 2 % for the year 2009 as a whole, making germany one of the industrial countries currently being affected particularly seriously by the crisis. the reasons are not hard to find. germany has an extremely open economy and is accordingly heavily dependent on exports. in addition, the range of german exports contains a large share of capital goods, that is to say goods for which global demand has slumped particularly distinctly on account of the crisis. the german example therefore demonstrates that the growing export specialisation of an economy is associated with stronger swings in the business cycle – at least in those cases in which the world economy is hit by a common global shock. to complete the picture, though, it needs to be noted that the german economy has benefited very strongly in the past few years from the cyclical stimuli emitted by exporters and their downstream industries. diversifying the export portfolio by region or product, however, ultimately will not protect an open economy such as germany ’ s from veritable global shocks. let me finally add with a view to the german banking system that lending by banks in germany to german non - banks grew with an annual rate of merely 0. 8 % on average in precrisis years ( ie 2004 to 2006 ). hence, during that time, german banks profited strongly from portfolio investments in structured financial products and booming real estate markets abroad. financial crisis and economic research let us return to the global view of the financial crisis. there is no disputing the fact that a whole cocktail of micro and macro - level factors caused the global financial crisis. the variety of causes leading to the current crisis is also reflected in this conference ’ s programme. this is already the second research conference jointly organised by the bundesbank and the banque de france. you will certainly be aware that research plays an important role in central banks. joint projects, conferences and discussions between researchers both within and outside the world of central banking have contributed time and again to further expanding and improving the theoretical foundations of economics and to backing them up empirically. the financial crisis has once again underlined clearly that, in this context, the interests of researchers and central bankers are very closely related, and not just in the area of monetary policy. a by - product of the crisis, so to speak, is that it has provided numerous ideas for the