As Iceland's growth period progressed, symptoms emerged of the economic overheating which has been one of the main concerns of the Central Bank in the implementation of monetary policy in recent years. For the Icelandic economy, the period from 1990-1995 was one of stagnation, apart from 1994 when growth shot up to 4.5%, only to fall back to virtually zero the following year. In 1996, however, the growth phase began which we have been enjoying ever since. Over this period, the entire output gap that was present then was closed, and more besides. National expenditure has been growing at a faster rate than national income, resulting in a large current account deficit. National expenditure rose by more in 2000 than the preceding year, so the current account continued to widen. GDP growth was less than the year before, although it did not slow down sufficiently to ease output pressure. In all likelihood, the overheating that has characterised the Icelandic economy in recent years peaked in 2000, since there were indications of a slowdown in domestic demand growth in the course of the year, although it remained very strong. The outlook is for a substantial reduction in the rate of economic growth in 2001. Clear signs of overheating were seen in the labour market. Seasonally adjusted unemployment decreased from 1.5% in January 2000 to 1.2% in July, then remained unchanged to the end of the year.
BIS Review 42/2007  1  Beyond that, there may be some additional questions to consider which, for the sake of argument and in order to launch the debate, I will put on the table rather in a provocative mode, but are dealt with in more detail and balance in my own (and some other) contributions to the Review. First question: what are the conditions to ensure an appropriate level of investor protection, and in particular, what are the consequences of the increased "retailization" of hedge funds? A second question is the future of the hedge fund industry. It is the nature of technological progress to spread in a way that the profits it creates to be competed away. Replicating hedge funds strategies – at lower costs – seems to be expanding. M. Hsieh will tell you more about it during the panel discussion. A third and important issue relates to the evolving relationship between banks and hedge funds. This relation is complex and multi-faceted. It is at the heart of the concept of indirect regulation. Finally, we have an ongoing debate about "transparency", on which I am sure that members of the panel will tell you more in a few minutes. By nature, hedge funds are secretive investors. They do not publish information about their positions and strategies. On the one hand, for markets to be fully efficient, some investors must be able to hold proprietary information and make profits on this basis.