Academic literature on the topic 'Add-on markets'

Purpose The study examines influence of behavioural economic theories of add-on goods and contingent charges on the regulation of two touchstone markets in the UK. These markets, the payment protection insurance (PPI) market and the market for overdrafts can both be characterised as add-on goods, have displayed excessive levels of profitability and been the focus of continuing and substantial public mis-trust. Despite these similarities, the regulatory treatment of these two markets has been very different. The purpose of this paper is to explore the context of these cases and examine why these differences in regulatory reporting have developed. Design/methodology/approach The research questions are examined through a detailed review of the regulatory reporting in the UK PPI and overdraft market. This review of over 20 regulatory reports, numerous enforcement actions, associated legal proceedings and related international evidence is employed to determine commonalities and differences in the regulatory actions proposed, motives adopted and success of these regulatory processes. Findings It is reported the dynamic and fragmented regulatory structure, multiple policy agendas and a successful legal intervention have all influenced how these financial services markets have been regulated and behavioural economic concepts applied. In particular aspects of overdraft markets remain challenging to address as it is still possible to exclude competition within aftermarkets. The regulatory intervention into PPI markets by contrast addressed concerns raised by add-on good theory and amended the form of distribution underlying this market more directly and successfully. Originality/value There have been numerous excellent reviews of behavioural economics and finance published on a diversity of topics. Despite such a wide coverage, a relatively under-researched aspect of this literature remains the application of these relatively new theoretical insights within markets and how these have influenced regulatory practice. This review of regulatory reporting addresses this gap in the literature through considering two of the most problematic financial services markets of the last decade in the UK.

We provide a dynamic extension of an economy with search on credit and labor markets (Wasmer and Weil 2004). Financial frictions create volatility. They add an additional, almost acyclical, entry cost to procyclical job creation costs, thus increasing the elasticity of labor market tightness to productivity shocks by a factor of five to eight, compared to a matching economy with perfect financial markets. We characterize a dynamic financial multiplier that is increasing in total financial costs and minimized under a credit market Hosios-Pissarides rule. Financial frictions are an element of the solution to the volatility puzzle. (JEL C78, E24, E32, E44, G21, J63)

This paper analyzes the dynamic time-frequency volatility spillovers among the international stock markets during the Russian-Ukraine conflict. We use the VAR-based connectedness framework to calculate the volatility spillovers. Results show that (1) the trend of the total spillover is consistent with the time of the Russian-Ukraine conflict; (2) Russian stock market is the primary source and net exporter of risk; (3) the Russian government has effectively controlled the further spread of risk through policy adjustments; and (4) Russian stock market may generate long-run volatility spillovers among the international stock market. We add research related to the impact of the Russia-Ukraine conflict on international stock markets by analyzing the results of the volatility spillovers.

Based on 96 CIO appointments during 1987–1998, Chatterjee et al. (2001) conclude that newly created CIO positions add value to the firm. This paper reexamines that conclusion by using the market's reaction to existing position appointments to benchmark the market's reaction to newly created position appointments. Based on 461 CIO appointments to new and existing CIO positions during 1987–2002, we find no significant difference in the market's reaction to the two types of announcements over the entire sample period. This finding holds when we allow for the market's perception of the value of information technology to shift over time. We also find evidence that the market penalizes firms that fail to move quickly enough to obtain potential strategic advantages from new CIO positions, consistent with first mover advantages. Finally, consistent with Ang et al. (2003) who examine CEO appointments, we find that markets discriminate among newly appointed CIOs in that CIO quality characteristics are associated as expected with the market's reaction to appointment announcements.

Purpose – The purpose of this paper is to examine how market-oriented and entrepreneurial-oriented behaviour drives firm performance in an emerging markets context. Design/methodology/approach – Using data from 170 Austrian exporters to Central and Eastern Europe, the authors test a conceptual model including market-oriented and entrepreneurial-oriented practices as predictors of performance. Findings – Results indicate that both market-orientated and entrepreneurial-oriented strategies have positive performance effects in emerging markets. Research limitations/implications – A limitation is that firms were not examined longitudinally, as this is a cross-sectional study. Future research may include longitudinal studies or focus on other markets/regions. Practical implications – Firms are encouraged to adopt a market-oriented and entrepreneurial-oriented strategy to achieve better results in international, emerging market operations. Originality/value – The authors add to the emerging economy research literature by studying the relevance of market orientation and entrepreneurial orientation in determining firm performance in emerging markets. Furthermore, this study supports the generalizability of findings from an advanced to an emerging economies research setting.

Proper risk management reduces risk, but does it necessarily add value for corporate shareholders? Modigliani and Miller argued in 1958 that the answer is 'no' in a perfect market setting. How risk management adds value in an imperfect markets setting is shown. In particular, the corporate risk management decision is linked to the leverage decision to measure the impact of risk reduction on shareholder value. A quantitative model is developed and is applied to five public commodity companies to calculate the value increase due to optimal risk management and leverage. Finally, the practical aspects of implementing a joint risk management and capital structure program are discussed.

International markets for U.S. forest products continue to make a significant contribution to the national economy; sustaining growth in production and job creation as demand from domestic markets is still yet to match that observed during the early 2000s. In this context, industry, government, and academia remain focused on procuring better market shares in foreign markets. The goal of this research is to help hardwood mills to improve their understanding of the needs of potential clients abroad and thus helping them to develop a competitive advantage. An exploratory study based on text mining of questionnaire data was conducted following a competitive criteria-based model on the major foreign markets for U.S. hardwood products. From a sample of buyers attending trade shows in Asia and Europe, this work has identified a series of factors for manufacturers to consider in future export ventures. It was determined that price and quality play multiple roles in developing a competitive advantage. Color-consistency and an adequate stock of the right mix of species are considered minimum requirements to compete in those markets. In contrast, certain time-compression dimensions are perceived as opportunities to add value and, therefore, to stay ahead of the competition.

Oil price forecasts are of crucial importance for many policy institutions, including the European Central Bank and the Federal Reserve Board, but projecting oil market evolutions remains a complicated task, further exacerbated by the financialization process that characterizes the crude oil markets. The efficiency (in Fama’s sense) of crude oil markets is revisited in this research through the investigation of the predictive ability of technical trading rules (TTRs). The predictive ability and trading performance of a plethora of TTRs are explored on the crude oil markets, as well as on the energy sector ETF XLE, while taking a special focus on the turbulent COVID-19 pandemic period. We are interested in whether technical trading strategies, by signaling the right timing of market entry and exits, can predict oil market movements. Research findings help to confidently conclude on the weak-form efficiency of the WTI crude oil and the XLE fund markets throughout the 1999–2021 period relative to the universe of TTRs. Moreover, results attest that TTRs do not add value to the Brent market beyond what may be expected by chance over the pre-pandemic 1999–2019 period, confirming the efficiency of the market before 2020. Nonetheless, research findings also suggest some temporal inefficiency of the Brent market during the 1 and ¼ years of pandemic period, with important consequences for energy markets’ practitioners and issuers of policy. Research findings further imply that there is evidence of a more intense financialization of the WTI crude oil market, which requires tighter measures from regulators during distressed markets. The Brent oil market is affected mainly by variations in oil demand and supply at the world level and to a lesser degree by financialization and the activity of market practitioners. As such, we conclude that different policies are needed for the two oil markets and also that policy issuers should employ distinct techniques for oil price forecasting.

Prediction markets add value when they produce unbiased forecasts. However, several prior studies find persistent biases when examining prediction market sides contracts. Sides contracts represent bets on whether the score differential between two teams in a contest will be greater or less than a stated value. We propose that inferences generated from examining Tradesports’ sides contracts may be problematic because they are framed exclusively with respect to favorites. If a favorite-longshot (or reverse favorite-longshot) bias causes these deviations from rationality, it may be that non-sports-related (e.g., internal corporate) prediction markets assets do not suffer from the same shortcomings. To evaluate the generalizability of prior findings, we contrast the price efficiency of Tradesports’ sides and totals contracts. In totals wagers, traders take a position on whether the combine score of both teams in a game will be above or below a stated value. We find that the fundamental structural differences between totals contracts and sides contracts partly determine differences in price efficiencies. Relative to those in the sides market, some price biases in the totals market are significantly smaller in magnitude, and others are absent altogether. Results indicate that contract structure plays a significant role in the ability of prediction markets to produce unbiased estimates.

This thesis aims to improve our understanding of firms' incentives to offer add-ons, as well as the implications that selling add-ons has for competition and welfare. It consists of three studies. In the first study we develop two models that explain the establishment of add-on pricing equilibria in markets with physical add-on services (e.g. hotels, airlines), and in software markets (e.g. apps with microtransactions). We show that add-on pricing equilibria can emerge despite consumers being fully rational and despite the presence of a binding price floor. The second and third studies analyse markets with naïve consumers. The goal of both studies is to explore the extent to which the incentive to exploit naïve consumers' mistakes affects firms' choices of horizontal product differentiation in the core product market. In the second study we analyse a model in which add-ons are unwanted - they are never purchased by sophisticated consumers. We identify conditions under which firms offer maximally differentiated products in order to soften competition, and conditions under which each firm offers a product similar to its rival's in order to maximise profits from exploitation. In the third study we develop a model in which add-ons are desirable - sophisticated consumers buy them under certain circumstances. We find that the sophisticates' demand for add-ons complicates the relationship between prices and the degree of horizontal product differentiation. This raises the possibility that intermediate product differentiation also emerges in equilibrium. Both the second and the third study show that benefits to consumers from the firms' choices of product differentiation can more than offset the harm to consumer welfare from the exploitation of consumer mistakes. Thus, whether conventional regulatory interventions have a positive effect on consumer welfare depends, to a large extent, on their effect on firms' product differentiation incentives.

Trading on the JSE Bond Market is still done in an archaic fashion when compared to the highly digitalised trading done within the equities markets in South Africa, indicating there is less market efficiency within bond trading. Technical analysis relies on market inefficiencies to achieve an informational advantage and so there could be technical analysis based trading opportunities within bond trading. Bollinger Bands are one of the more prominent technical analysis methods. In this dissertation they are used in trading simulations to generate buy and sell signals in order to test if there is any value-add in their implementation. The dissertation attempts improve Bollinger Band based trading in two ways. The first involves attempts to more accurately estimate the underlying distribution of the time series, that is assumed to be normal in the standard methodology. It is shown that no additional benefit is derived from the alternative distribution estimation methods. Bollinger Bands make an assumption of stationarity on the time series on which they are implimented and so the second attempt at improved accuracy addresses this notion. Cointegration is used to generate linear combinations of bonds that are stationary, leading to more accurate application of the Bollinger Bands. The stationary combination of bonds produces positive results from the trading simulations, primarily within the combinations that are generated from a linear combination of less bonds and that posses larger variation. Not considering the liquidity assumtions, the positive results show that there is value-add within specific technical analysis based trading strategies.

Carbon markets open several important avenues of inquiry into resource governance designed to address problems like climate change. The discipline of economic geography is well situated to add insight. This chapter examines the underlying assumptions behind market-based governance, particularly the emphasis on controlling greenhouse gases through pricing. The pricing of externalities alone does not guarantee the material changes in energy use now in the future that are required to combat climate change. A new framework for consideration of the spatial and temporal dynamics of value is proposed. A renewed focus on use value and its spatial characteristics could lend considerable insight to the understanding of industry, market creation, and resource governance. For example, entraining the temporal production of instruments of exchange to their sources of production and creating property rights to manage natural resources as service stocks rather than commodities could better generate external value.

This chapter explores the prevalence of business groups in Britain. It shows that during the nineteenth century British merchant houses established business groups with diversified portfolio and pyramidal structures overseas, primarily in developing countries, both colonial and independent. These business groups were resilient and successful until the late twentieth century. In the domestic economy, the business-group form had a more limited role. Large single product firms were the norm, which over time merged into large combines with significant market power. This reflected a business system in which a close relationship between finance and industry was discouraged, but there were few restrictions on the transfer of corporate ownership. Yet large and successful diversified business groups did emerge which had closely held shareholding and international businesses. Especially between the 1970s and the 1990s, large diversified conglomerates also flourished. This evidence shows that diversified business groups can add value in mature markets.

The chapter provides a macro-level analysis of the legalization, standardization, and integration of global environmental rules. The statistical tests rely on two new datasets on global treaty regimes and business stakeholders in those regimes. The results demonstrate that treaty regimes that regulate oligopolistic industries tend to become integrated over time with protocols, amendments, and similar agreements that add new rules or institutions to the international regime. They also consist of legally binding agreements, not soft law commitments by parties, and standardized rules applicable to all member states or categories of member states. By contrast, treaty regimes that regulate competitive markets tend to become more disintegrated (or unintegrated) over time. These international regimes are also legal hybrids because they consist of hard and soft law, and often give countries the responsibility to make nationally specific commitments. Producer-level concentrations significantly constrain the design of global environmental treaty regimes.

This chapter discusses trading book models. Risk models come in a variety of types. However, for market risk purposes there have been a number of types which may be used within the framework. The simplest is the ‘CAD 1’ model — named after the first Capital Adequacy Directive, which permitted such models to be used in the calculation of regulatory capital. VaR models, permitted by Basel 2, were more complex, and this complexity was increased by Basel 2.5, which required the use of ‘stressed VAR’. In due course all of this will be replaced by the Basel 3 FRTB calculation, which rejects VAR and is based on the calculation of an expected shortfall (ES) market risk charge, a VaR based default risk charge (DRC) (for those exposures where the bank is exposed to the default of a third party), and a stressed ES-based capital add-on.

This book has investigated how Bolivian market and working class women suffered from emotional distress wrought by the social and economic changes of the 1990s due to neoliberal reforms. Focusing on the stories of women in Punata, it has shown how neoliberalism and its moral dimensions transformed bodies into new sites of consumption, desire, and aspiration, which must contend with the social mores that piece together sociality. The findings of this book add to the scholarship on emotions, embodiment, and social suffering in the Andes by highlighting the ways in which intimate narratives of market and working-class women are intrinsically linked to broader national and transnational political economic relationships. This conclusion takes a look at multiple attitudes toward the government of Evo Morales, who promised to dismantle Bolivia's neoliberal agenda after winning the presidential election in December 2005. It also reflects on how emotions constitute a fruitful site from which to examine the effects of globalization and the role they play in reconfiguring social relations.

Contemporary welfare states attempt to govern unemployment using active labour market policies to reconnect jobseekers with the labour market. Critics suggest these reflect a punitive turn in social policy and are ineffective in any case, leading to debates over the evidence-bases and ideological underpinnings of social policy. Here, we investigate the deeper cultural codes which inform how the state governs the unemployed and how individuals interpret their experiences of work and jobseeking in the labour market. Specifically, we argue that there are unrecognised theological models which animate the contemporary scene – explored through an approach which combines cultural sociology and governmentality studies, a historicisation of the present which we term ‘Archaic Anthropology’. We draw together Nietzsche’s genealogy of the revaluation of suffering, Weber’s thesis on the Protestant work-ethic, Foucault’s analysis of pastoral power and Agamben’s work on how the economy is given a providential meaning in modernity. Through empirical analyses of interviews, ethnographies and social policy we add to this an analysis of the ‘economic theology’ of the welfare state; specifically, we identify a Purgatorial inspiration for workhouses and welfare offices, job-seeking as a form of Pilgrimage, and CVs as confessional declarations of faith. Effectively, the state is dedicated to ‘reform’ – of policies and of individuals, in an almost endless attempt to transform people through purifying suffering. Yet there are alternatives, more forgiving, charitable and generous cultural resources within society.

This chapter, which discusses the evolution of innovative research on game playing in the household and online, such as in studies of massive multiplayer, three-dimensional Internet game environments, demonstrates the need for Internet Studies to deal with the ebbs and flows of the market and the rapid pace of technical change. The video game industry is one of the most profitable and dynamic industries in entertainment. Its future will possibly add a mix of social connectivity and continuing advances in technology as players seek each other as much as they seek games. Casual games are frequently incorporated into pre-existing social networks. Serious games did result in a change in knowledge, opinions, and possible future actions. The research community surrounding games comes from communication, psychology, cultural and critical studies, sociology, and now even business, economics, and computer science.

Drawing on survey data from a comparative study of England and Wales and the former East and West Germany, this book examines economic crimes of ‘everyday life’, such as overestimating losses in insurance claims, cheating on taxes, misusing store or credit cards, and defrauding medical and social services. The book delves into the extent of both feelings of ‘victimization’ at the hands of insurers, restaurants who add additional charges, banks who make excessive charges, or other citizens during second-hand sales, and of offending, such as deliberately engaging in crimes of everyday life. The study explores the motivations for such offences and how citizens act to defend themselves against victimization and exploit weaknesses in the system to make illegal gains and ‘make good’ on losses. The comparative dimension allows for in-depth insights into the ways in which different national histories of economic transitions affect levels of engagement in crimes in the market place.

The work “Reassignment of Law from the new coronavirus pandemic” is an interdisciplinary collective production idealized under the perceptive lenses of notable scope professionals in the legal universe, working in the various fields of law, in the noble priesthood of the law, judiciary, economics, psychology, masters, doctors and post-doctors, with renowned national and international institutions degrees. The careful reading of this impressive collection shows that the new coronavirus invites to the non-negotiable duty of reflection, both on the large scale suffering it imposed on humanity and on the legal repercussions of the pandemic situation consequences. The reflections proposed in this book suggest that postmodern society change course is unavoidable. Furthermore, they seek to add density and hope to legal science in this time of uncertainty, strategically re-signifying post-pandemic law, with the incessant expectation that the next chapters of universal history will be marked by the overcome capacity, based on the hegemony of rights and respect for human dignity, under the reign of legitimate justice.

AbstractThis chapter covers the critical topic of standards within the area of big data. Starting with an overview of standardisation as a means for achieving interoperability, the chapter moves on to identify the European Standards Development Organizations that contribute to the European Commission’s plan for the Digital Single Market. The author goes on to describe, through use cases, exemplar big data challenges, demonstrates the need for standardisation and finally identifies the critical big data use cases where standards can add value. The chapter provides an overview of the key standardisation activities within the EU and the current status of international standardisation efforts. Finally, the chapter closes with future trends for big data standardisation.

AbstractThe Swiss government, through its Energy Strategy 2050, is engaged on a path to transition Switzerland to become a carbon-neutral country by the year 2050. In this chapter, we look at the impact that the electorate can have on this transition and on the Swiss electricity market. This is done using hybrid agent-based modelling. We model the Swiss electricity market and we add to this a model of the policy-making process. This allows us to study which policy instruments are more likely to be implemented depending on the Swiss electricity market progression and on the policy actors’ interests. The results have shown that the electorate has a limited impact on the policy chosen and on the electricity market. Overall, an environmentally conscious electorate leads policy actors to select the carbon tax as a policy more often. This, however, has the adverse effect to increase the electricity price and increase import dependency in winter. In high demand growth scenarios, the carbon tax policy is not sufficient to stem the construction of gas turbine power plants. We also show that because the electricity model does not consider an extended demand response option or technology advancement, the knowledge gained from this model is limited. This drives the behaviour of the model into scenarios which are unlikely to happen, such as a large increase of the gas turbine power plants. Overall, we conclude that, in their current form, even with an environmentally conscious electorate, the electricity market conditions do not allow Switzerland to reach its emissions targets.

AbstractIn this chapter, we show what and how space syntax has contributed to theoriesand general knowledge of the built environment. First, we provide an introduction to two established researchtraditions, positivismand hermeneutics. The aim is to demonstrate through modal logic what the possibilities and limitations are for gaining general understandings and making theoretical explanations from space syntax research. Modal logic uses expressions to test the explanatory power of statements. Second, we show what space syntax adds to the debate about spatialintegrationand spatial segregation as seen in relation to market and socialrationality. We will focus on the spatial aspects and discuss these in relation to declining versus vital neighbourhoods, crime, anti-socialbehaviour, cultures, political ideologies, gender, and the use of space. Third, we give some reflections on what space syntax has contributed in regards to a comprehensive architecture theory. Finally, at the end, we add as an epilogue a thought experiment on how space syntax theories can be applied within the compact city debate. Exercises are provided at the end of this chapter.

AbstractTo date, no systematic attempt has been made to describe the main features of the Italian policy advisory system. In particular, we know very little about the role of political scientists within it. This study addresses precisely this gap in the literature. First, by presenting original data derived from an online survey to which 177 Italian political scientists responded, we reconstruct frequency, type, recipient(s), and areas of their (potential) policy advice. Second, by focusing on two very relevant policy processes—the approval of the so-called Italicum (electoral law) and of the so-called Jobs Act (labour market reform)—we add insightful qualitative details to our quantitative analysis. Empirical results show that Italian political scientists are seldom engaged in policy advisory activities: many of them have never been. Moreover, there are no particular differences—from the point of view of personal characteristics (gender and level of academic career)—between policy advisors and the so-called pure academics. Finally, as the two case studies show, informal advice has the greatest impact on policymaking. This latter aspect reminds us of how much the Italian policy advisory system (PAS) is still poorly institutionalised and largely based on personal relationships as well as on political proximity.

The shift to a knowledge-based economy results largely from developments in information and communications technologies. Knowledge-based economies offer huge opportunities for small to medium-sized enterprises (SMEs) to develop entirely new high-value products and services, add value to existing products and services, reduce costs, develop new export markets, and add value to existing activities. Implicit promises include access to world markets, low-cost entry into new markets, and the ability to gain efficiencies in business processes. However, these promises may be illusory for most SMEs. Technological, organizational, and marketing hurdles are also making it more difficult for SMEs to succeed in knowledge-based economies. This chapter identifies those major factors that are hindering the success of SMEs in knowledge-based economies. The chapter then goes on to suggest a set of guidelines to make SMEs succeed in this new knowledge-based society.

This chapter introduces the concept of “two-sided” markets and shows how they comprise a unique type of social media that facilitates the development of social networks oriented toward specific product domains (e.g., restaurants), specific brands (e.g., Starbucks), or common consumer concerns (e.g., Yelp.com). Not only do two-sided-markets constitute a unique type of Website, they can be integrated with or linked to other social media, thereby enriching the value of both the two-sided market and its partner(s). Because a two-sided market increases in value for all three parties that constitute it (consumers, the platform, and vendors) as the number of both vendors and consumer participants grows, platform managers are eager to use incentive strategies to encourage consumers to increase their active use of the site. Among these incentive strategies are various reward programs that stimulate use by rewarding consumers who add content, post reviews, comment on others’ reviews, and more. Part of this chapter describes two online experiments that demonstrate that two types of common reward programs, monetary and social rewards (Heyman & Ariely, 2004), are effective in stimulating consumer intent to use the site more actively than without a reward. Finally, we make several suggestions for integrating two-sided markets into other social media, and we propose several avenues for future research into this topic that should increase our understanding of how consumers behave in two-sided markets and how platform managers can both enhance active use and use the information derived from this use.

As BRICS markets have continued to evolve, similar definitional criteria have been applied to other countries and regions. This chapter looks at some of these groups and, with input from academicians, practitioners, and practical thinkers, sorts out what common factors add to their attraction, problems, and potential. These emerging economies are grouped as TIMP, MINT, N11, and Frontier Markets. The chapter examines the critical nature of existing positives and negatives that impact or impede growth and how they are being addressed. Observations on infrastructure and demographics, financial system status, governance and governments, are compared with criteria generally present in developing economies such as stability of the countries, politics, and fiscal and monetary policy. The chapter also examines other factors like trade barriers, regulatory environments, access to equitable quality, education, geographic location advantage, and other factors that may be indicators of future emergence onto the global stage.

There are few studies on the collection and market of medicinal plants in South America and particularly in Peru. Through a review of secondary sources, information is gathered on the use and market of medicinal plants, and information is provided on the collection, collection and market of medicinal plants in the department of Cajamarca, focused on a chain of value of fresh plants (57 species) and another of dry plants (37 species), which mainly supply coastal markets. It is also reported on the collection in the first months of the COVID19 pandemic. The species come mainly from the Quechua region (2300 to 3500 masl), 51% are wild and the others are cultivated or weeds. Its main threats are mining, agricultural expansion, overgrazing, burning of natural vegetation, and over-harvesting. The monetary value of these plants is approximately US $ 804,333.64/year. In the first months of COVI19, the demand for eucalyptus, matico, chamomile and husk increased, mainly, and prices rose by more than 200%. Value chains are informal, they add minimal value to products, with the predominance of the interest of wholesale collectors.

This chapter addresses the difficulty of establishing pass-on. Indeed, estimating pass-on is difficult and often impossible. Even where estimates of the pass-on rate can be generated, estimates of the overcharge are still required to quantify the amount of pass-on. For indirect purchasers, this will add to the difficulty because they may not have the necessary data and knowledge of successive upstream markets. There is also uncertainty to the standard of proof and evidential burden required to establish credible pass-on rates. However, there are a range of approaches that can be used to estimate or quantify the pass-on rate, which are set out in the European Commission’s Pass-on Guidelines. These include documentary evidence on firms’ pricing policies; economic theory/simulations; evidence on the way the direct and indirect purchasers have passed on cost increases in the past, arguing that they would react similarly to an overcharge; third party research on the way the industry has been passed on in the past; and statistical approaches either using multiple regression analysis, time series analysis, or event studies. The volume effect can be estimated using similar approaches although the Pass-on Guidelines suggest multiple regression analysis and the ‘elasticity approach’.

This chapter challenges the domestic-international dichotomy. Many established theories of revolutionary emergence focus on domestic factors such as economic downturns, elite conflict and defection from the state, and the mobilizing capacity of opposition forces. This dichotomy makes the international influence on all of these domestic factors opaque. Domestic economic conditions are heavily shaped by international markets. Elite decisions about whether to support or oppose the state are linked to alliances with other nations and international organizations. And oppositional organizing capacity is enhanced by support from transnational movements (such as the influx of resources from diaspora supporters) and the transmission of tactics and strategies from revolutionaries in one region of the world to another. In short, there are no fully domestic revolutions; revolutions are always influenced by international factors. Yet all too often, revolutionary scholarship has seen international factors as a backdrop to domestic factors, which are perceived as having the real explanatory power. Researchers have grafted international factors onto existing models in an “add and stir” approach, rather than examining how international dynamics permeate and shape domestic dynamics “all the way down.” The chapter proposes an alternative “inter-social” approach. It highlights how international dynamics help to constitute revolutionary situations, trajectories, and outcomes through an analysis of the 1977–79 Iranian revolution.

Global brands have encouraged the penetration of products in markets, but new contexts have emerged, where brands add value to the productive sectors and promote the creation and growth of new companies. An approach and analysis of the contemporary construction of the sector brand and the value it provides to insert countries, territories, cities and products in global markets is carried out. On the other hand, in the Latin American context, we can observe the emergence of emerging brands that have their origin in the need to meet the demand of priority sectors or undertakings derived from the identification of unattended market niches, with the potential to become trademarks in a higher level

The mortgage crisis, started in 2007 in USA, turned into global financial crisis at the end of 2008. This crisis is assumed to be the largest crisis after The Great Depression occurred in 1929. Global Financial Crisis spread out from USA to developed countries and eventually other countries. Some financial institutions went bankruptcy and some of rest has been survived with governments’ financial supports. Crisis affected the real economy after financial markets, due to crisis production and employment decreased all over the countries. Excess liquidity, deterioration of the mortgage loans structure, excessive increases in house prices, securitization of subprime mortgages, lack of transparency, expansion of derivative markets, ineffectiveness of credit rating agencies and delay of regulatory agencies’ intervention are assumed as “reasonable reasons of the crisis. Before all these reasons, deregulation in financial market in USA is the main reason of this crisis. Corporate governance is against decontrol and lack of transparency which cause crisis. Corporate governance focuses on four pillars, which are fairness, transparency, accountability and responsibility. These four principles are associated with measurement and development of performance of government and companies. In this study, we looked from corporate governance window to the global financial crisis, and expressed lessons and advices to be determined. With effective corporate governance, it is expected to add value to stakeholders and being responsible to social values.

Proposals for a Regulation on a Single Market For Digital Services (Digital Services Act) and Regulation on contestable and fair markets in the digital sector (Digital Markets Atc) of 15th of December, 2020 were long-avaited tools, through which, in the field of digital services, a higher degree of legal certainty for the consumer should be ensured and the functional responsibility regime of online platforms should be secured, in direct proportion. Submitted proposals preceded open public consultation of interested stakeholders, including the general public, academics, digital companies and other businesses, associations, civil society public authorities, and trade unions. The need to adopt adequate legislation in line with rapid technological development also stemmed from the fact that the E-commerce Directive was adopted in 2000 and has so far been considered as the main legal framework governing the issue of digital platforms, but it is also necessary to add that the regulation of online platforms has been mainly left to the Member States. As much of the activity has shifted to the online enviroment, digital platforms are playing an increasingly important role in our lives. The purpose of this paper is to analyze the relevant provisions of the proposal in the context of competition rules and also in view of the increased use of online platforms due to the global crisis. The content of the article will also contain a brief comparison with the current legal situation with reference to the practical implications that await us with the adoption of the new legislation.

Managing design freezes plays an important part in today’s competitive markets and successful freeze management can make the difference between delivering a product in time and in budget or failed design projects. On the one hand, design managers want to limit change propagation by freezing components or component-interfaces in order to avoid unwanted change propagation and to meet design lead-times. On the other hand freezing the design of a component too early can constrain innovation and having to unfreeze a design that was frozen before can add further redesign costs. This paper introduces an algorithm for determining an optimal change freeze order (CFO) based on combined change risks and component redesign cost, which has been applied in an automotive company in the design of a diesel engine.

Many current manufacturers provide not only tangible products to their customers, but also services which are accompanying their products. Moreover, manufacturers add smart services to their service offerings. Applying the change toward smart services is not easy, especially in SMEs where many of businesses struggle with lack of money, insufficient digital technologies or unskilled employees. The aim of the study mentioned in this paper explores current situation in SMEs and their attitudes related to collaboration with other subjects on their markets. To address the research objective, a qualitative multi-case study was conducted among seven Czech electrotechnical SMEs, which have already started with smart service development. The findings can indicate two approaches of collaboration based mostly on the owners’ enthusiasm for smart services, management’s age and the length of running their business. The study is unique in highlighting the problems of smart services in SMEs in the Czech Republic, where the industrial sector is still dominant in comparison to other European countries.

In 2010, according to the International Energy Agency, coal fired power plants provided 49% of U.S. electricity — far higher than its 31.2% share of electric generating capacity — due to coal plants being run at higher capacity rates. This was due to the stable costs associated with coal as compared with the volatility of the natural gas markets. The remaining coal plants, which represents over 200GW of capacity, will likely require significant investment in air quality control systems (AQCS) and efficiency upgrades to survive. One of the fastest and most cost effective means to achieve greater energy efficiency and add capacity is through modernization of the steam turbine components. In many cases, modernized turbines can be manufactured and ready for installation in less than two years. Coal plants that will continue to operate for the next 20 or more years will likely have to have AQCS, which can consume up to 30% parasitic load (i.e. carbon capture). This load loss can be recovered in part through modernizing the original steam turbine with the latest technology. This paper will provide a commentary on trends and observations on the direction coal plants are taking and provide industry goals. An example of a steam turbine modernization will be discussed and the benefits it provides, such as improvement in performance, availability, reliability, life extension, and reduced life cycle costs. Opinions will be presented on the dynamic nature of the market.

The hybrid electric vehicle is changing the automotive market at an impressive rate. While not as highly publicized, the transit bus market is being transformed at an equally great rate. As these markets move forward, the school bus market remains largely unchanged. As an unchanged market, there is still the opportunity to optimize a hybrid vehicle platform for school buses. This study models an existing class C school bus and investigates the potential of both series and parallel hybrids to reduce fuel consumption and emissions. The primary focus of this study is to investigate the potential benefits of adding an electric grid interconnection to hybrid electric school buses, allowing them to add to the hybrid potential to a pre-charged battery pack. These vehicles are known as plug-in hybrids. The school bus models shown in this paper were generated in a Matlab/Simulink-based program developed by NREL called ADVISOR. ADVISOR is used by vehicle manufacturers as a tool to experiment with different vehicle configurations. In this study both a generic series hybrid and a generic parallel hybrid are generated and used in both charge-sustaining and charge-depleting scenarios with varying sizes of battery packs to increase the “grid energy.” The results of each model are presented by fuel economy and emissions reductions taking into account the power plant emissions and electricity costs. The results of the study show that by adding a plug-in connection to existing hybrids, significant savings can be achieved, both in fuel costs and in overall emissions. By analyzing the emissions at the power plant level and at the vehicle level we show that emission of NOx, Particulate Matter and Carbon Dioxide can all be reduced while saving on fuel costs. This study also shows that some models of traditional hybrid can be operated as plug-in models with little or no change to the system to gain significant benefit from the initial charge.

Real time monitoring for asset management is fast gaining popularity in the power industry. Power plants are transitioning from the initial data gathering to projects creating measurable value for the owner and operator. The authors present an integrated approach, allowing real-time monitoring and advanced analytics for asset management. We specifically look at the changing landscape for plant operators in a renewable integrated grid. Moreover, in today’s volatile electricity markets, most power plants must be flexible; often load following to minimum loads, and frequently cycling on-off. This type of cycling operation can be very damaging to fossil power plants, and add large costs due to increased equipment wear and tear, and adverse heat rate effects. For some large generation units, these costs can amount to millions of dollars per year. These costs can be greatly reduced by proper operations tuning and operator training. This paper will specifically discuss the value of real time monitoring and advanced analytics to plant operators. We will address the uncertainty, given that plant’s typically follow instructions from dispatch, and provide business case examples of what needs to be done and what value it will actually bring to the industry.

To meet the challenge of deregulation and customer demands for a free competitive market, the electric utility industry in the U.S. (and, for that matter, throughout the world) will experience tremendous changes over the next five years. These changes will be driven by two major forces: the deregulation of the industry and, therefore, no guaranteed return on investment but more importantly, the demands of customers for a free competitive market in the electric utility industry where they can achieve the lowest cost for the commodity. This will force utility companies to position themselves as low-cost producers. Although low cost does not necessarily mean success, it is obvious that cutting and/or reducing capital expenditures will play the most important role. Unregulated markets encourage product diversity, as firms look for “niche” profit opportunities. A pervasive lesson from other industries that have recently been deregulated clearly shows that unless properly planned, these companies will not only do poorly but may be completely wiped out from the market Generation Planning (base load vs. peak load, long-term vs. short-term) will become more important since two-thirds of the capital investment is tied to generation facilities. While low-cost utilities will have greater flexibility in adapting to competition, they will be far from immune to industry changes. Under a fully competitive marketplace, all generating plant assets/investments will come out of a rate base. Since all companies will be exposed to competition, high-cost generating assets would no longer be subsidized by ratepayers. This will force the utility companies to invest in low capital cost generation only, at least during the next ten to fifteen years. This paper will briefly discuss the status of various advanced generation technologies with respect to their costs, applicability and limitations, where these technologies are expected to be cost effective and finally how these technologies compare with the state-of-the-art combined cycle gas-turbine technology. It is predicted that as environmental regulations tighten on pollution, advanced generation technologies may benefit at the expense of current fossil fuel technologies. However, it is not certain whether economic growth in the U.S. can be sustained if new regulations on pollution force to add new plants with advanced generation technologies, compared to continuing with today’s generation mix. It will be examined how, when and where the advanced generation technologies would play an important role in penetrating the market on their own merits.

Since the late 1970’s, Aseptic Not-From-Concentrate Orange Juice (NFCOJ) has been successfully stored in large refrigerated aseptic storage tanks. Aseptic tanks have evolved from 280,000 gallons in volume to now in excess of 1.8 million gallons each. The total bulk storage capacity in Florida has grown to approximately 280 millions of gallons and continues to grow with new installations occurring each year at some facilities. Worldwide, the market is expanding into Brazil, Spain, and markets that are beginning to receive juice shipped in bulk on snips. The aseptic storage methods have been accepted in Brazil and Europe, and aseptic transfer of the juice is occurring via specially outfitted aseptic tanker vessels from Brazil to the US and Europe. The consumer’s demand for NFCOJ has grown steadily throughout these years, and the suppliers of consumer packaged orange juice have developed special processes and methods to maximize the quality and flavor of the juices sent to the market. Fresh juice, light pasteurization, and flavor enhanced products are just some of these methods resulting in very high quality juice availability. Also, cost and price are always under assault, and the juice suppliers are always looking for an edge. Recently, the flavor enhancement method has come under scrutiny by the FDA, and the industry is being reminded that all added flavors must be made from naturally occurring orange derivatives or must be labeled appropriately: such as “with natural (other fruit) flavors” or “with artificial flavors,” both of which may have an undesirable impact on the market perception of the juice quality. At this same time, as the bulk storage technology of NFCOJ has matured in the past 25 years, some processors who package their own juice are investing in special aseptic transfer methods from the aseptic bulk storage tanks without the need to re-pasteurize the juice prior to packaging. Their goal is to provide the highest quality juice to the consumer, and to minimize or eliminate the need to add expensive and special flavor packs to the juice. This is being done commercially in Florida and Spain. This paper explores these methods of aseptic juice transfer direct to packaging and the aseptic addition of natural or otherwise desired and labeled ingredients, and their potential impact on the quality of the juice. Paper published with permission.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.

In the second quarter, annual inflation (9.67%), the technical staff’s projections and its expectations continued to increase, remaining above the target. International cost shocks, accentuated by Russia's invasion of Ukraine, have been more persistent than projected, thus contributing to higher inflation. The effects of indexation, higher than estimated excess demand, a tighter labor market, inflation expectations that continue to rise and currently exceed 3%, and the exchange rate pressures add to those described above. High core inflation measures as well as in the producer price index (PPI) across all baskets confirm a significant spread in price increases. Compared to estimates presented in April, the new forecast trajectory for headline and core inflation increased. This was partly the result of greater exchange rate pressure on prices, and a larger output gap, which is expected to remain positive for the remainder of 2022 and which is estimated to close towards yearend 2023. In addition, these trends take into account higher inflation rate indexation, more persistent above-target inflation expectations, a quickening of domestic fuel price increases due to the correction of lags versus the parity price and higher international oil price forecasts. The forecast supposes a good domestic supply of perishable foods, although it also considers that international prices of processed foods will remain high. In terms of the goods sub-basket, the end of the national health emergency implies a reversal of the value-added tax (VAT) refund applied to health and personal hygiene products, resulting in increases in the prices of these goods. Alternatively, the monetary policy adjustment process and the moderation of external shocks would help inflation and its expectations to begin to decrease over time and resume their alignment with the target. Thus, the new projection suggests that inflation could remain high for the second half of 2022, closing at 9.7%. However, it would begin to fall during 2023, closing the year at 5.7%. These forecasts are subject to significant uncertainty, especially regarding the future behavior of external cost shocks, the degree of indexation of nominal contracts and decisions made regarding the domestic price of fuels. Economic activity continues to outperform expectations, and the technical staff’s growth projections for 2022 have been revised upwards from 5% to 6.9%. The new forecasts suggest higher output levels that would continue to exceed the economy’s productive capacity for the remainder of 2022. Economic growth during the first quarter was above that estimated in April, while economic activity indicators for the second quarter suggest that the GDP could be expected to remain high, potentially above that of the first quarter. Domestic demand is expected to maintain a positive dynamic, in particular, due to the household consumption quarterly growth, as suggested by vehicle registrations, retail sales, credit card purchases and consumer loan disbursement figures. A slowdown in the machinery and equipment imports from the levels observed in March contrasts with the positive performance of sales and housing construction licenses, which indicates an investment level similar to that registered for the first three months of the year. International trade data suggests the trade deficit would be reduced as a consequence of import levels that would be lesser than those observed in the first quarter, and stable export levels. For the remainder of the year and 2023, a deceleration in consumption is expected from the high levels seen during the first half of the year, partially as a result of lower repressed demand, tighter domestic financial conditions and household available income deterioration due to increased inflation. Investment is expected to continue its slow recovery while remaining below pre-pandemic levels. The trade deficit is expected to tighten due to projected lower domestic demand dynamics, and high prices of oil and other basic goods exported by the country. Given the above, economic growth in the second quarter of 2022 would be 11.5%, and for 2022 and 2023 an annual growth of 6.9% and 1.1% is expected, respectively. Currently, and for the remainder of 2022, the output gap would be positive and greater than that estimated in April, and prices would be affected by demand pressures. These projections continue to be affected by significant uncertainty associated with global political tensions, the expected adjustment of monetary policy in developed countries, external demand behavior, changes in country risk outlook, and the future developments in domestic fiscal policy, among others. The high inflation levels and respective expectations, which exceed the target of the world's main central banks, largely explain the observed and anticipated increase in their monetary policy interest rates. This environment has tempered the growth forecast for external demand. Disruptions in value chains, rising international food and energy prices, and expansionary monetary and fiscal policies have contributed to the rise in inflation and above-target expectations seen by several of Colombia’s main trading partners. These cost and price shocks, heightened by the effects of Russia's invasion of Ukraine, have been more prevalent than expected and have taken place within a set of output and employment recovery, variables that in some countries currently equal or exceed their projected long-term levels. In response, the U.S. Federal Reserve accelerated the pace of the benchmark interest rate increase and rapidly reduced liquidity levels in the money market. Financial market actors expect this behavior to continue and, consequently, significantly increase their expectations of the average path of the Fed's benchmark interest rate. In this setting, the U.S. dollar appreciated versus the peso in the second quarter and emerging market risk measures increased, a behavior that intensified for Colombia. Given the aforementioned, for the remainder of 2022 and 2023, the Bank's technical staff increased the forecast trajectory for the Fed's interest rate and reduced the country's external demand growth forecast. The projected oil price was revised upward over the forecast horizon, specifically due to greater supply restrictions and the interruption of hydrocarbon trade between the European Union and Russia. Global geopolitical tensions, a tightening of monetary policy in developed economies, the increase in risk perception for emerging markets and the macroeconomic imbalances in the country explain the increase in the projected trajectory of the risk premium, its trend level and the neutral real interest rate1. Uncertainty about external forecasts and their consequent impact on the country's macroeconomic scenario remains high, given the unpredictable evolution of the conflict between Russia and Ukraine, geopolitical tensions, the degree of the global economic slowdown and the effect the response to recent outbreaks of the pandemic in some Asian countries may have on the world economy. This macroeconomic scenario that includes high inflation, inflation forecasts, and expectations above 3% and a positive output gap suggests the need for a contractionary monetary policy that mitigates the risk of the persistent unanchoring of inflation expectations. In contrast to the forecasts of the April report, the increase in the risk premium trend implies a higher neutral real interest rate and a greater prevailing monetary stimulus than previously estimated. For its part, domestic demand has been more dynamic, with a higher observed and expected output level that exceeds the economy’s productive capacity. The surprising accelerations in the headline and core inflation reflect stronger and more persistent external shocks, which, in combination with the strength of aggregate demand, indexation, higher inflation expectations and exchange rate pressures, explain the upward projected inflation trajectory at levels that exceed the target over the next two years. This is corroborated by the inflation expectations of economic analysts and those derived from the public debt market, which continued to climb and currently exceed 3%. All of the above increase the risk of unanchoring inflation expectations and could generate widespread indexation processes that may push inflation away from the target for longer. This new macroeconomic scenario suggests that the interest rate adjustment should continue towards a contractionary monetary policy landscape. 1.2. Monetary policy decision Banco de la República’s Board of Directors (BDBR), at its meetings in June and July 2022, decided to continue adjusting its monetary policy. At its June meeting, the BDBR decided to increase the monetary policy rate by 150 basis points (b.p.) and its July meeting by majority vote, on a 150 b.p. increase thereof at its July meeting. Consequently, the monetary policy interest rate currently stands at 9.0% . 1 The neutral real interest rate refers to the real interest rate level that is neither stimulative nor contractionary for aggregate demand and, therefore, does not generate pressures that lead to the close of the output gap. In a small, open economy like Colombia, this rate depends on the external neutral real interest rate, medium-term components of the country risk premium, and expected depreciation. Box 1: A Weekly Indicator of Economic Activity for Colombia Juan Pablo Cote Carlos Daniel Rojas Nicol Rodriguez Box 2: Common Inflationary Trends in Colombia Carlos D. Rojas-Martínez Nicolás Martínez-Cortés Franky Juliano Galeano-Ramírez Box 3: Shock Decomposition of 2021 Forecast Errors Nicolás Moreno Arias