Since then, there has been a strong upturn in growth in the second half of last year. Available short-term indicators suggest that growth will also be strong in the first half of this year, in line with current forecasts. The positive outlook for euro area growth incorporated in current forecasts is supported by favourable conditions for growth from both the domestic and the external side. The growth in domestic demand has proved highly robust in the face of the slowdown which followed the Asian crises. The fact that confidence indicators are currently at or close to record highs is fuelling expectations that domestic demand growth will also be strong this year and next. Continued strong employment growth and increasing capacity utilisation, among other factors, should underpin the expansion of private consumption and investment. On the external side, there are now increasing signs that the upturn in growth in the global economy has been stronger, more rapid and more broadly based than was expected at the end of last year. Reflecting this favourable external environment, the growth in euro area exports should remain strong. 3  BIS Review 58/2000  There are, of course, some uncertainties surrounding euro area growth prospects. These come mainly from the external side. They are mostly linked to a possible pronounced slowdown in the US economy and the ensuing negative effects on the growth of the world economy. In the present context of strong growth, the outlook for inflation should be examined thoroughly.
All the prominent scholars who are presenting papers today will analyse some of the aspects of how and why market risk premiums vary. Financial regulations and financial frictions are  BIS central bankers’ speeches  1  important to our understanding of why risk premiums change over time. A thorough understanding of financial regulations and financial frictions might also be important in identifying unique investor characteristics. Axel Weber will shed light on the implications of financial sector regulation on the functioning of markets and the pricing of assets. Lasse Pedersen has provided valuable research on the micro structure of funding markets and how liquidity risks create systemic problems. In particular, he will cover frictions in financial markets. It is quite clear that the Government Pension Fund differs from the average investor in important respects. In addition, we need to understand how variation in risk premiums can be consistent with highly competitive financial markets. Why don’t all investors buy “value” or rebalance? Ken Froot will talk about rare events and disaster risks, how these events are priced in markets. He will also give insights on individual investor characteristics which give comparative advantages in holding these priced risk premiums. Ken French will speak about two ways for an investor to generate excess returns: informational advantages and systematically harvesting risk premiums which the investor has a comparative advantage in holding. Both Froot and French will mainly talk about average portfolio weights in highly competitive markets.