inflation targeting. there can be little doubt that both real and financial global integration have brought enormous economic benefits. still, it has been increasingly questioned of late. we partly understand why. we know that there are significant gains from real integration but that there are winners and losers. the losers can be compensated in principle, but in practice this does not always happen. inequality has increased within many countries and economic integration is blamed, although research shows that technological change plays a significantly bigger role. at least in part, the case of financial integration is different. finance is an integral part of economic progress, and there are significant benefits from global financial integration. but more is not always better when it comes to finance, as we learned the hard way during the latest financial crisis. furthermore, large and volatile capital flows can undermine the financial stability of countries. it is not clear who the winners are in that case nor what the compensation mechanism would be. spillover effects from monetary policy of global rate setting countries to small, open and financially integrated economies ( sofies ) increase as global financial integration intensifies. in particular, if the global rate setter experiences an economic slack at a time when a sofie is booming, the sofie might find it difficult to pursue warranted macroeconomic policies without risks to financial stability and / or significant detrimental effects on export sectors. this could be the case if there are perceived limitations to the use of fiscal policy ; for instance, if there is already a sizable headline surplus. in this situation, macroprudential and even capital flow management measures could help. in iceland ’ s case and some others, this raises the issue of compatibility with existing international and regional treaty obligations regarding free movement of capital. the jury is still out on these issues. it is one thing to try to make global financial integration safer and to mitigate unwanted spillover effects – which might involve some retrenchment, as it did in this country and many others after the crisis – but it is another matter entirely to bring about a large - scale reversal of the global financial integration of recent decades. most likely, such a reversal would seriously undermine real economic integration and the benefits associated with it. we are going to discuss these issues and others that pertain to the current state and future prospects of global economic integration. after jaime ’ s keynote speech, we will have two sessions with substantive presentations and discussions on different aspects of the topic. this afternoon, we aim to take stock of recent trends in global and regional economic and

roughly 100 seminars around the world and must be among the best connected individuals in this business. at the time of the 70th anniversary of the bretton woods conference he edited a large volume of short essays on the international monetary system that i among many others had the pleasure to contribute to. i have also spoken in several of his seminars. it is a great pleasure to work with him, and he has become a good friend. i have come to realise that what drives him is a passion to improve the international monetary system. it matters a lot, and for various reasons it matters more for small countries like iceland than for big countries that can better fend for themselves in a non - multilateral and non - rule based world. that is why we are having this conference here. marc, the floor is yours.