changing economic, social and international environments. i expect that through discussion, those from both academic circles and central banks will learn more, share insights, and make the most of the wisdom for the future conduct of monetary policy. i certainly welcome discussions on how central banks can best contribute to sustained economic growth and sound development of the global economy. thank you.

toshihiko fukui : the challenges for sustained economic growth under changing economic, social and international environments opening speech by mr toshihiko fukui, governor of the bank of japan, at the 11th international conference sponsored by the institute for monetary and economic studies, bank of japan, tokyo, 5 july 2004. * * * introduction good morning, ladies and gentlemen. i am very pleased to address the 11th international conference hosted by the institute for monetary and economic studies. on behalf of my colleagues at the bank of japan, i welcome the participants from all over the world. this year ’ s conference is focused on “ the challenges for sustained economic growth under changing economic, social and international environments. ” over the two - day conference, we will explore a broad range of issues on economic growth. what are the major engines of economic growth? what are the long - term effects of uneven growth over the economies on global resource allocation? what roles should a government and a central bank play in promoting sustained economic growth? major engines of sustained economic growth our understanding of economic growth has advanced significantly since the revival of growth theory in the mid - 1980s. for the last two decades economic growth has been one of the most sought - after subjects of economic research. the new “ endogenous ” growth theory has provided various systematic expositions of technological progress, such as creation, accumulation and diffusion of new ideas. the standard growth theory tells us that economic growth in per capita basis comes from mainly two sources : capital deepening and total factor productivity growth, or tfp growth. capital deepening increases output along the production function. tfp growth increases output by pushing the production function upward. the former faces the diminishing marginal productivity as capital deepening progresses, and the latter becomes increasingly important in achieving sustained growth in the long - term. as the new endogenous growth theory suggests, tfp growth is closely related to accumulation of the intangible capitals, such as human capital and research and development. we see a lot of evidence that such investments have actually trended upward. in particular, workers with high educational backgrounds and those engaged in research and development have both increased in major industrial countries. interactions between trend growth paths and business cycles growth theory tends to focus on the trend growth paths in the long run. observed growth paths, however, are not smooth. there exists a dynamic interaction between trend growth paths and business cycles. how do macroeconomic fluctuations influence the trend growth paths? how do the trend growth