Study Probes Role of Finance in the Economy

The Open University (OU) has been awarded EUR 1.49m by the European Commission to co-ordinate a new research project to examine the link between the financial sector and the real economy across Europe.

The three-year project - known as FINNOV (Finance, Innovation and Growth) - will look at the role of finance in growth, employment and competitiveness in Europe. It will be co-ordinated by the OU, which will lead a consortium of institutions including the University of Cambridge UK; Sant'Anna School of Advanced Studies, Italy; the Polytechnic University of Marche, Italy; the Economics Institute, Czech Republic; the University of Bordeaux, France; and the University of Sussex, UK.

'Not enough is understood about the influences and interactions between the financial sector and other elements,' stated Professor Mariana Mazzucato, who as the Director of the OU's research centre, will lead the initiative. 'Understanding more will allow us to better stabilise European economies in the future.'

Mazzucato says that the challenge is to understand the complex role of finance in the real economy and investigate how differences (such as those in shareholder attitudes) between the institutions and the economic participants (such as investors, shareholders and consumers) involved govern this relationship.

Areas to be explored include the role of venture capital and stock markets in supporting innovative firms; interactions between financial systems, firm bankruptcy and employment; the effects of house bubbles on consumption; and understanding the implications of innovation in financial services for the long-term development of the sector.

Findings will be disseminated at a national and international level to policy makers, Non-Governmental Organisations (NGOs) and key industries such as IT, biotech and pharmaceuticals.

Web sites: www.finnov-fp7.eu and www.open.ac.uk .