stanley fischer : education and israel ’ s future address by professor stanley fischer, governor of the bank of israel, at the degree presentation ceremony of the open university of israel, raanana, 21 may 2008. * * * it gives me special pleasure to participate in this degree presentation ceremony of the open university, because nothing is more crucial to israel ’ s future than education. in the long run, education is as important as the country ’ s security and geopolitical situation. the reasons are well known. israel has hardly any natural resources, apart from human capital, i. e., its citizens ’ talents and initiative, and these must be nurtured constantly. thus, and only thus, will be able to maintain and increase israel ’ s qualitative advantage. the state of israel, and before its establishment the yishuv ( the pre - state jewish population in palestine ), long placed great emphasis on education. this can be seen in various figures relating to the position in israel in 2005 compared with that in other countries : a. forty - six percent of those aged 25 - 64 years in israel had post - high - school education, compared with an average of 26 percent in the oecd countries. b. the ratio of government expenditure per student on pre - school, elementary and secondary education to gdp per capita in israel was similar to that in the oecd, and in tertiary education the ratio was higher in israel than in the oecd. c. as early as at the establishment of the state, israel had two universities of internationally recognized standing – the hebrew university of jerusalem, and the technion, the israel institute of technology, in haifa. this was an impressive achievement for a population of less than a million. and today we have a broad network of higher - education institutions, including the open university, which provides an opportunity to tens of thousands of israelis to realize their potential. however, as is well known, the situation in the education system in israel no longer occupies the exalted position it held in the past. for example, the low position in the scale of achievements attained by students of schools in israel, e. g., in science, compared with other countries – based on the pisa ( programme for international student assessment ) tests coordinated by the oecd – stands out like a sore thumb. thus, despite the fact that the government spends a relatively large amount on education, students ’ achievements are relatively poor. in other words,

of exchange rate regime and the extent of their capital controls. the imf has an index of capital controls for which the latest year is 2005. 7 it is available for only 90 of the 186 countries for which exchange rate regime data are available. a probit regression was run of the exchange rate regime ( coded 1 if an intermediate regime, 0 otherwise ) on the extent of capital controls, an index that runs from zero to one ( e. g. japan and the uk are zero, the united states is 0. 2, and india is 0. 95 ). the estimated relationship is positive but weak, 8 and significant only at the 15 % level. on further examination of the data, it appears that there might be a bias with regard to the countries for which capital controls data are available : among the advanced countries, the capital controls index is available for 23 out of 25 countries ; for the emerging market countries, the capital controls variable is available for 32 out of 39 countries ; and for the " other " category ( data on which are presented in table 3 below ), capital controls data are available for only 35 of 118 countries. it is quite likely that the extent of capital controls among the countries in the " other " group for whom the capital controls index is not available, is significantly higher than in the advanced and emerging market groupings. the frequency of intermediate regimes is also higher in the " other " group ( 47. 5 % versus 4 % for advanced countries and 35. 9 % for emerging market countries ). i would like here to make two comments on the impossible trinity, in relation to jeff frankel's statement that one can have half stability and half independence of monetary policy. in the first instance, while the impossible trinity is usually stated in terms of an independent monetary policy, it should more accurately be stated in terms of independent macroeconomic policy, for when a currency comes under serious pressure, typically both monetary and fiscal policy have to adjust if the exchange rate is to be maintained. this was, for instance, clear in the collapse of the argentine currency peg. second, an " independent " monetary policy in this context is one that is targeted at something other than the exchange rate. for many countries that have given up exchange rate pegging, the monetary regime switches to inflation targeting, in practice typically flexible inflation targeting. for others, monetary policy is directed to a range of targets, including inflation and growth, sometimes also the real exchange rate, with tradeoffs among them to