Academic literature on the topic 'Price paths'

We investigate consumer price convergence for 82 Indonesian cities using monthly data from 2014 to 2019. To do so, we employ recent techniques of club convergence and weak sigma convergence. The results reveal, first, consumer price divergence, implying price rigidities across the cities. Second, we find four clubs, suggesting that Indonesian cities converge along four unique transition paths. Third, we find weak evidence of consumer price convergence, suggesting that prices among Indonesian cities adjust, but not freely. Policy should therefore consider unique convergence paths for each club to promote stronger consumer price convergence.

Pricing greenhouse-gas (GHG) emissions involves making trade-offs between consumption today and unknown damages in the (distant) future. While decision making under risk and uncertainty is the forte of financial economics, important insights from pricing financial assets do not typically inform standard climate–economy models. Here, we introduce EZ-Climate, a simple recursive dynamic asset pricing model that allows for a calibration of the carbon dioxide (CO2) price path based on probabilistic assumptions around climate damages. Atmospheric CO2 is the “asset” with a negative expected return. The economic model focuses on society’s willingness to substitute consumption across time and across uncertain states of nature, enabled by an Epstein–Zin (EZ) specification that delinks preferences over risk from intertemporal substitution. In contrast to most modeled CO2 price paths, EZ-Climate suggests a high price today that is expected to decline over time as the “insurance” value of mitigation declines and technological change makes emissions cuts cheaper. Second, higher risk aversion increases both the CO2 price and the risk premium relative to expected damages. Lastly, our model suggests large costs associated with delays in pricing CO2 emissions. In our base case, delaying implementation by 1 y leads to annual consumption losses of over 2%, a cost that roughly increases with the square of time per additional year of delay. The model also makes clear how sensitive results are to key inputs.

Based on the purchase price data of new real estate markets three cities in China, Beijing, Shanghai, and Guangzhou, including architectural features, neighborhood property features, and location features, in this study a boosting regression tree model was built to study the factors and the influence path of housing prices from the microcosmic perspective. First, a classical hedonic price model was constructed to analyze and compare the significant effect factors on housing prices in the market segments of the three cities. Second, the gradient boosting regression tree method that is proposed in this paper was applied to the three markets in combination to analyze the influence paths and factors and the importance of the type of housing hedonic price. The influence paths of housing hedonic prices and decision tree rules are visualized. The significant housing features are effectively extracted. Finally, we present three main conclusions and several suggestions for policy makers to improve urban functions while stabilizing real estate prices.

Abstract Mortgage credit risk measurement hinges on the choice of a house price stress path, which is used to project loan losses and determine financial capital requirements. House price paths are commonly constructed at national or state levels and shock scenarios are created to mimic historical adverse market conditions. We provide evidence that this level of geographic aggregation is not granular enough in many cases—collateral risk often varies within cities. Using local house price indices that cover the United States from 1975 to 2016, we focus on house price performance in the years immediately following sustained periods of rapid acceleration. Price accelerations tend to exhibit temporal clustering and occur with greater frequency in large versus small cities. We exploit within-city variation in price dynamics to provide evidence that price initially overshoot sustainable levels but, in some areas, dynamics may reflect positive underlying economic fundamentals and can be sustained. After accelerating, price reach their trough after 4 or 5 years. Small cities show uniform declines whereas large cities exhibit greater price decreases farther away from city centers. These findings suggest differential collateral risk exists in large cities, financial losses can be predictable based on real estate location theory, and localized house price paths could aid credit risk management.

Spot prices in energy markets exhibit special features, such as price spikes, mean reversion, stochastic volatility, inverse leverage effect, and dependencies between the commodities. In this paper a multivariate stochastic volatility model is introduced which captures these features. The second-order structure and stationarity of the model are analyzed in detail. A simulation method for Monte Carlo generation of price paths is introduced and a numerical example is presented.

Spot prices in energy markets exhibit special features, such as price spikes, mean reversion, stochastic volatility, inverse leverage effect, and dependencies between the commodities. In this paper a multivariate stochastic volatility model is introduced which captures these features. The second-order structure and stationarity of the model are analyzed in detail. A simulation method for Monte Carlo generation of price paths is introduced and a numerical example is presented.

Oil as a strategic resource, its price trend related to the development of national economy, so the study of the international oil price has important theoretical and practical significance. This paper will interpret the international oil price fluctuation mechanism from the perspective of international political economy. In addition, we will reveal some elements of influence on international oil prices, such as oil supply and demand pattern, geopolitical game, monetary, financial futures market. Then we try to put forward the some paths for the construction of energy security strategy in china.

This paper is addresses to see how the impact of the factor price equalization in product pricesequalization. According to Heckser-Ohlin (H-O) model, trade in goods will cause the absolute and relativeprices of factor between counties to move toward equality. If free trade occurs, factor prices between countrieswill not different when countries producing the same mix of product with the same technologies and the sameproduct price must have the same factor prices. Product prices equalization will occur when the countrieshave same set unit value isoquant (UVI) and, as well under CRS condition MPL and MPk are constant alongexpansion paths of each industries

The ripple effect of housing price movements between cities has been extensively investigated, but there are relatively few studies on this topic within a metropolitan context, especially at the submarket level. This paper describes the use of ripple effect theory to examine the diffusion process and convergence of intra-urban housing prices at the submarket level in Shanghai, an emerging global city in China. The analysis is based on directed acyclic graphs, local indicators of spatial association time-paths, and a recently developed convergence test. The empirical results of grouping analysis identify 25 submarkets in Shanghai, and the diffusion of housing prices between these submarkets is found to be caused by both geographical and economic proximities. There is also a complex recursive process of price spillovers from high- to low-priced submarkets, and vice versa, which contributes to the spiraling local housing prices. Housing prices diverge across all submarkets, and the whole market can be divided into three convergence clubs. Finally, these convergence clubs have a circular structure with a degree of continuity. This study broadens our knowledge of the price interrelationship among housing submarkets at the intra-urban level. These findings have profound implications for urban planners, policy makers, and local residents.

This thesis explores the question of model-free trading and hedging in markets where traded asset prices are continuous and where one may trade continuously in time with no transaction costs. In particular, we make no assumptions on the volatility of traded asset prices. The contributions of the thesis are as follows. First, we propose a framework of model-independent replication of financial derivatives based on solutions to systems of PDEs evaluated at market-observed inputs. This provides a model-independent extension of the paradigm of dynamic hedging to general markets with continuous prices. We then relate these replication strategies to local martingales of a certain closed form and characterise the latter for several specifications of markets. The markets we consider are: (1) a market with no traded claims, (2) a market with an underlying asset and a convex claim, (3) a market with an underlying asset and a set of co-maturing call options. The auxiliary results for the latter two markets may be of interest outside of the local martingale characterisation results. Thirdly, we propose a definition of integration with continuous paths that justifies a probability-free version of the hedging results outlined earlier. Finally, we present a number of smaller contributions related to model-free hedging and to probability-free integration with continuous paths.

>Magister Scientiae - MSc
This paper focuses on the newly revived interest to model free approach in finance. Instead of postulating some probability measure it emerges in a form of an outer-measure. We review the behavior of a market stock price and the stochastic assumptions imposed to the stock price when deriving the Black-Scholes formula in the classical case. Without any stochastic assumptions we derive the Black-Scholes formula using a model free approach. We do this by means of protocols that describe the market/game. We prove a statement that prices a European option in continuous time.

Dans un graphe non orienté, le problème du sous-graphe k-sommet connexe consiste à déterminer un sous-graphe de poids minimum tel que entre chaque paires de sommets, il existe k chemins sommet-disjoints. Ce modèle a été étudié dans la littérature en termes d'arête connexité. Cependant, le cas de la sommet connexité n'a pas été traité jusqu'à présent. Nous décrivons de nouvelles inégalités valides et nous présentons un algorithme de Coupes et Branchements ainsi qu'une large étude expérimentale qui montrent l'efficacité des contraintes utilisées. Nous proposons ensuite une formulation étendue pour le même problème pour une connexité k=2, suivi d'un algorithme de Génération de Colonnes et Branchements pour résoudre cette formulation.Nous étudions ensuite la version avec chemins bornés du problème. Le problème consiste à trouver un sous-graphe de poids minimum, tel que entre chaque paire d'origine-destination, il existe k chemins sommet-disjoints de longueur au plus L. Nous proposons une formulation linéaire en nombres entiers pour L=2,3. Nous présentons de nouvelles inégalités valides et nous proposons des algorithmes de séparation pour ces contraintes. Nous présentons ensuite un algorithme de Coupes et Branchements qu'on a testé sur des instances de la TSPLIB
Given a weighted undirected graph and an integer k, the k-node-connected subgraph problem is to find a minimum weight subgraph which contains k-node-disjoint paths between every pair of nodes. We introduce new classes of valid inequalities and discuss their facial aspect. We also devise separation routines, investigate the structural properties of the linear relaxation and discuss some reduction operations that can be used in a preprocessing phase for the separation. Using these results, we devise a Branch-and-Cut algorithm and present some computational results. Then we present a new extended formulation for the the k-node-connected subgraph problem, along with a Branch-and-Cut-and-Price algorithm for solving the problem.Next, we investigate the hop-constrained version of the problem. The k node-disjoint hop-constrained network design problem is to find a minimum weight subgraph such that between every origin and destination there exist at least k node-disjoint paths of length at most L. We propose an integer linear programming formulation for L=2,3 and investigate the associated polytope. We introduce valid inequalities and devise separation algorithms. Then, we propose a B\&C algorithm for solving the problem along with some computational results

Cette thèse étudie des systèmes locaux de gestion de transfert de pétrole ayant une architecture de réseau de canalisation. Pour leur représentativité, deux systèmes localisés au Venezuela et appartenant à l'entreprise PDVSA (Pétroles du Venezuela) ont été retenus pour illustrer les méthodes proposées et les valider : le Terminal Maritime de Pétrole de Guaraguao et le Centre de Stockage de Punta de Palmas. Dans ces réseaux des connexions, appelées " alignements ", sont établies en ouvrant/fermant des vannes à travers d'un système SCADA (Supervisory Control and Data Acquisition). Le choix d'un alignement doit tenir compte de critères d'optimisation. La minimisation des interférences avec d'autres alignements, liée à la notion de capacité opérative, a été identifiée comme le critère de choix le plus important. Les contributions de cette thèse reposent sur une modélisation sous forme de graphes, et sur des algorithmes appartenant au domaine de la recherche opérationnelle. Elles contribuent à fournir aux opérateurs de supervision des outils d'analyse permettant d'optimiser le choix des alignements. Des indicateurs permettant de quantifier l'impact des opérations d'alignement ou des défaillances, sur la capacité opérative du système, sont proposés. La minimisation de l'impact sur la capacité opérative, va correspondre à la minimisation des interférences avec des alignements potentiels. Un algorithme de calcul de ces indicateurs, est présenté, ainsi que des algorithmes de recherche de chemin, de détermination d'éléments critiques, et de recherche d'alignements utilisant des pompes. Ces algorithmes sont basés sur des algorithmes classiques s'adressant au problème du plus court chemin, du flot maximum et du nombre maximum de chemins disjoints. Cependant, ils utilisent des méthodes innovantes, comme l'ajout de contraintes considérant l'existence de sous-types d'alignements, le calcul dynamique des coûts des chemins à partir de son impact sur la capacité opérative, et la recherche de chemins via un point intermédiaire obligatoire. Les contributions sont potentiellement applicables dans des domaines autres que le transport de pétrole. Les algorithmes ont été mis en œuvre en utilisant le langage Python et ont été testés en utilisant les données réelles des réseaux étudiés. L'objectif à moyen terme de ces travaux est le développement d'un logiciel d'assistance à la prise de décision.

In this thesis, we study robust combinatorial problems with interval data. We introduce several new measures of robustness in response to the drawbacks of existing measures of robustness. The idea of these new measures is to ensure that the solutions are satisfactory for the decision maker in all scenarios, including the worst case scenario. Therefore, we have introduced a threshold over the worst case costs, in which above this threshold, solutions are no longer satisfactory for the decision maker. It is, however, important to consider other criteria than just the worst case.

Therefore, in each of these new measures, a second criteria is used to evaluate the performance of the solution in other scenarios such as the best case one.

We also study the robust deviation p-elements problem. In fact, we study when this solution is equal to the optimal solution in the scenario where the cost of each element is the midpoint of its corresponding interval.

Then, we finally formulate the robust combinatorial problem with interval data as a bicriteria problem. We also integrate the decision maker's preferences over certain types of solutions into the model. We propose a method that uses these preferences to find the set of solutions that are never preferred by any other solution. We call this set the final set.

We study the properties of the final sets from a coherence point of view and from a robust point of view. From a coherence point of view, we study necessary and sufficient conditions for the final set to be monotonic, for the corresponding preferences to be without cycles, and for the set to be stable.

Those that do not satisfy these properties are eliminated since we believe these properties to be essential. We also study other properties such as the transitivity of the preference and indifference relations and more. We note that many of our final sets are included in one another and some are even intersections of other final sets. From a robust point of view, we compare our final sets with different measures of robustness and with the first- and second-degree stochastic dominance. We show which sets contain all of these solutions and which only contain these types of solutions. Therefore, when the decision maker chooses his preferences to find the final set, he knows what types of solutions may or may not be in the set.

Lastly, we implement this method and apply it to the Robust Shortest Path Problem. We look at how this method performs using different types of randomly generated instances.

Doctorat en sciences, Orientation recherche opérationnelle
info:eu-repo/semantics/nonPublished

L’état de santé des personnes âgées se dégrade, les niveaux de dépendance s’accroissent, induisant de profondes conséquences sur l’organisation sanitaire en France. Les fractures du col du fémur illustrent ce défi au regard de leur fort impact sur la qualité de vie et sur la morbi-mortalité des patients. Notre étude quantitative et qualitative, (Jan. 2012 - Jan. 2013) au sein du principal service de chirurgie orthopédique d’Alsace, a permis de retracer le parcours de soin de 107 patients âgés de 75 ans et plus. Notre principale conclusion est que le patient n’a que très peu de place dans le processus décisionnel de son parcours de soin. Cela est d’autant plus dommageable que cette fracture revêt une double signification: physique (besoin d’assistance accrue) et symbolique (dépendance anticipée). Notre étude interactionniste permet de dégager des pistes d’actions opérationnelles dans les domaines sanitaires, politiques et éthiques afin de limiter les effets délétères de cette pathologie
In a context of depressed health-conditions for elderly people, the levels of dependency are rising. It induces deep consequences for the entire health care organisation. For instance, the fractures of the femoral neck (FFN) represent a healthcare challenge regarding their strong impact on patients’ quality of life and on their morbity-mortality. We conducted a qualitative and quantitative study (Jan. 2012- Jan. 2013) within the main department of orthopedic surgery in Alsace in order to track the healthcare paths of 107 patients of 75 years-old or more. Our main conclusion is that patients are poorly involved in the decisions for their care. This is all the more harmful because the FFN is in fact dual. It is both a physical (higher assistance needed) and a symbolic (earlier dependency) breakage. Our interactionist study identifies areas for pragmatic actions in health-care, public policies and ethic that could contribute to absorb / reduce the pernicious effects of this pathology

AbstractThis chapter explores the upward social mobility trajectories, and the corollary prices of them for those 45, first-in-family college educated Roma in Hungary who come from socially disadvantaged and marginalised family and community background. We argue that among the academically high-achieving participants of our study the most common upward mobility trajectory, contrary to the common belief of assimilation, is their distinctive minority mobility path which leads to their selective acculturation into the majority society. This distinctive incorporation into the mainstream is close to what the related academic scholarship calls the ‘minority culture of mobility’. The three main elements of this distinct mobility trajectory among the Roma are (1) The construction of a Roma middle class identity that takes belonging to the Roma community as a source of pride, in contrast of the widespread racial stereotypes in Hungary (and all over Europe) that are closely tied to the perception of Roma as a member of the underclass, (2) The creation of grass-roots ethnic (Roma) organizations and (3) The practice of giving back to their people of origin that relegate many Roma professionals to a particular segment of the labour market, in jobs to help communities in need. However, we argue that in the case of the Hungarian Roma, these elements of the minority culture of mobility did not serve the purpose of their economic mobility as the original concepts (Neckerman et al. Ethnic and Racial Studies 22(6):945–965, 1999) posits, but to mitigate the price of changing social class and to make sense of the hardship of their social ascension.

In this paper, authors explore the analysis and development of a innovative coupling system for industrial vehicles. After an introduction of the topic and the objectives, the advantages for developing such a system are described in detail. Some previously published studies with similar content or conclusions necessary to the understanding of the system under study are also presented. In order to develop a system more precise than the currently used, the common systems are study in this paper, focusing on four wheeled trailers, varying the coupling system’s rotation center, which can be on the front or rear vehicles. In the commonly used systems the trailers tend to get too close from the rotation center, this means that both trailers have lower trajectory paths and not ideal precision. Having studied the systems currently used in shop floor, a new coupling system is developed, with the aim of increasing trailers’ trajectory precision and manoeuver options. Two different systems were under study. The first one is to control the trailers steering mechanism, in order to position the trailer in a more precise position. The other system is simply altering the coupling system length and rotation centers. By analyzing both results, the solution with the rotation of the rear axle in each trailer guarantees better precision, where the trailers perform a trajectory precision of 100%. However, the solution that better fits the industrial reality is the solution with the alteration of the length and the rotation center of the coupling system. This solution allows less precision but its better in price, cost and implementation effort.

Compliant mechanisms are widely used in the industry and have gained more popularity in the past few decades with the advancements in smart materials and micro-electro mechanical systems (MEMS). Compliant mechanisms offer huge advantages over the classical rigid linkages due to their flexible behavior. Such flexible mechanisms reduce production time and cost especially that they eliminate the need of joints that can get pretty hectic especially at micro level manufacturing and assembly. By avoiding multi-joints in the design and their consequent clearances, a compliant mechanism can offer higher precision over its rigid counterpart. However, these advantages come with a price; compliant mechanisms are more challenging in terms of design and analysis. Many compliant mechanisms are designed to undergo relatively large deflections which in turn impose geometric nonlinearities. In the past, many compliant designs were based on intuition, experience, and trial and error. Later on, many theories developed to assist in designing and analyzing compliant mechanisms before proceeding with the manufacturing phase. This paper covers topology optimization of compliant structures using beam elements. The swarm intelligence technique known as Ant Search (AS) is used to find the optimum design that satisfies the required mechanism performance. A case study that involves the topology design of a miniature compliant displacement amplifier is presented and results are compared with the finite element solver ANSYS. The optimized topology mechanism produced a much larger amplification ratio as compared to that presented in literature. Results produced show the high potential of swarm intelligence and AS in particular at solving multi-disciplinary optimization problems that should not be limited to designs that involve physical paths.

Abstract This study deals with a development of wire path searching module as a part of automotive wire harness design system. Wire path searching module manages the free space, finds transition locations, and creates bundle paths to dramatically reduce a tedious iterative routing process which results in easy optimization of the bundle paths. A prime policy in the system configuration is to compromise between man’s and computer’s ability, and make it possible a designer’s leading role in designing process. Human input is indispensable to cope with the special cases which were not considered in the initial design stage of the system. In this study, we improve the previous shortest-path-finding algorithm (VGraph and RCA method) into a new method called Extended RCA. Bundles, connectors and transitions are handled as objects so one can manage and modify physical properties of the objects easily. Therefore a verification is allowed at any desired stage of design. The reuse of previous result is facilitated by using Dependency Structure, which represents the mutual relations among connectors, transitions, and bundles. Dependency Structure makes it possible the elimination of redundant calculating process, and consequently shorter routing time.

The aim of this paper is the analysis of the contemporary state of implementation of artificial intelligence in the area of unmanned aerial vehicles (UAV), and a proposal of further use of artificial intelligence systems in this area in the future. We analyse three essential areas in which artificial intelligence systems are currently being implemented to some extend – path following, object detection and tracking, and anti—collision systems. In each mentioned area we apply different solution methods, technical requirements, but also advantages and disadvantages of those solutions. We present an overview of artificial intelligence as a scientific branch. Finally, we present an overview of how artificial intelligence in the field of UAV could be implemented in the future, based on an analysis of the current state and direction of research and development in the present. We describe the possibilities of use artificial intelligence systems in two areas that are currently receiving the most attention at concept level, namely the flight of autonomous UAV swarms and the improvement of communication and data exchange between individual UAVs using artificial intelligence.

Data communication and management represent a crucial part of future systems in aviation. Huge recent technological advancements have led the whole aeronautical industry into the new evolutionary era called Aviation 4.0. The goal of Aviation 4.0 is the creation of cyber-physical system, following the path from advanced automation, to very first autonomy systems efficiently assisting human. This system involves multiple direct data related applications and devices, including AI analytics, massive use of IoT devices, machine learning capabilities, or advanced monitoring. Due to needed enormous flow of data, current connectivity solutions are becoming insufficient for the future use cases. Near future connectivity problems may become very apparent in datalink. With exponentially increasing amount of data needed by the future aircraft systems, higher datalink communication capacity and better performance of datalink subnetwork are required to meet the higher performance standards and levels of operational safety. This paper offers complex overview of current datalink communication technologies, planned concepts and possible solutions to the problem, in the form of new datalink technology – LEO mega satellite constellation offering Internet connectivity. Through basic deductive research, paper is aimed to study existing datalinks and proposed new LEO satellite communication datalink, evaluating their performance based on the future datalink requirements stated in studied plans and roadmaps. Furthermore, Aviation 4.0 dominant aspects are studied, requirements on future data communication technology are declared, and the possible use cases of Aviation 4.0 smart aircraft systems are showed. The objective of this paper is targeted to determination whether any of the researched datalink subnetwork would comply with Aviation 4.0 future datalink requirements.

Under increasingly uncertain environment of long term life-cycle costs arising from such causes such as material price increases and carbon regulation, product development design decision makers need an improved method for evaluating project net present value under significant risks. This paper seeks to expose this need for an interdisciplinary design method capable of proactively managing long-term uncertainties and risks. First, the paper provides an overview of trends and uncertainties in material prices and environmental regulations. Second, we highlight a variety of existing work relevant to this research. The third section describes Customer Value Chain Analysis and Quality Function Deployment exercises towards addressing the nature of the challenge at hand. The study found that the primary customers for this research are engineering managers involved in strategic product development decisions. The most important aspects of a new methodology are to identify and characterize the uncertainties specific to a project, and to facilitate modeling. The final section describes a research path leading towards the development of a new design methodology. The paper concludes that a new framework will draw upon a variety of fields including Design For Reliability, Decision Analysis, Industrial Ecology, and Informatics.

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%.

The last decade has brought a row of substantial changes that have profound implications for the traditional hydrocarbon resource-rich economies. Economic conditions may change radically either throughout a decade or within months. The question is whether there is no other option for a hydrocarbon resource-rich economy than to be held hostage to the fluctuations in global oil prices. The general answer to a changing environment is: Adapt! From the macroeconomic perspective, this means diversifying the economy to broaden the income base and significantly reduce the dependence on oil revenues. The Saudi Vision 2030 represents a complex plan for substantial socioeconomic adjustments that are about to move the economy toward a more diversified and sustainable one. This discussion paper examines the preferred diversification paths for the Saudi economy in more detail, with a focus on the foreseen adjustments in the sectoral composition of the economy along with broader macroeconomic shifts. The evaluation of the foreseen diversification impacts is based on the updated Vision 2030 Input-Output Table that maps the changing structure of the Saudi economy over the coming decade. We discuss the assumed expansion of the diversification frontrunners, their changing contribution to the overall economic activity and identify the preferred diversification paths for the Saudi economy. The advances in economic diversification are measured by applying the Shannon-Weaver index to sectoral GDP and household income. The expected sectoral changes are wide-reaching, so the basic macroeconomic relations are also subject to adjustments. We also conduct a sensitivity analysis to examine the effects of the foreseen diversification on the resilience of the Saudi economy to external shocks.

This report forecasts growth in developing Asia of 7.1% in 2021 and 5.4% in 2022 in an uneven recovery caused by divergent growth paths. Its theme chapter explores sustainable agriculture. Growth forecasts are revised up for East Asia and Central Asia from the projections made in April, but down for South Asia, Southeast Asia, and the Pacific. This reflects differences in vaccination progress and control of domestic COVID-19 outbreaks but also other factors, including rising commodity prices and depressed tourism. Inflation is expected to remain under control. The main risks to the economic outlook come from the COVID-19 pandemic, including the emergence of new variants, slower-than-expected vaccine rollouts, and waning vaccine effectiveness. Sustainable food production and agricultural systems that are resilient to climate change will be crucial for developing Asia. To transform agriculture in the region, its economies must tackle challenges from changing consumer demand, changing demographics, and a changing and more fragile environment.

The Colombian financial system has not suffered major structural disruptions during these months of deep economic contraction and has continued to carry out its basic functions as usual, thus facilitating the economy's response to extreme conditions. This is the result of the soundness of financial institutions at the beginning of the crisis, which was reflected in high liquidity and capital adequacy indicators as well as in the timely response of various authorities. Banco de la República lowered its policy interest rates 250 points to 1.75%, the lowest level since the creation of the new independent bank in 1991, and provided ample temporary and permanent liquidity in both pesos and foreign currency. The Office of the Financial Superintendent of Colombia, in turn, adopted prudential measures to facilitate changes in the conditions for loans in effect and temporary rules for rating and loan-loss provisions. Finally, the national government expanded the transfers as well as the guaranteed credit programs for the economy. The supply of real credit (i.e. discounting inflation) in the economy is 4% higher today than it was 12 months ago with especially marked growth in the housing (5.6%) and commercial (4.7%) loan portfolios (2.3% in consumer and -0.1% in microloans), but there have been significant changes over time. During the first few months of the quarantine, firms increased their demands for liquidity sharply while consumers reduced theirs. Since then, the growth of credit to firms has tended to slow down, while consumer and housing credit has grown. The financial system has responded satisfactorily to the changes in the respective demands of each group or sector and loans may grow at high rates in 2021 if GDP grows at rates close to 4.6% as the technical staff at the Bank expects; but the forecasts are highly uncertain. After the strict quarantine implemented by authorities in Colombia, the turmoil seen in March and early April, which was evident in the sudden reddening of macroeconomic variables on the risk heatmap in Graph A,[1] and the drop in crude oil and coal prices (note the high volatility registered in market risk for the region on Graph A) the local financial markets stabilized relatively quickly. Banco de la República’s credible and sustained policy response played a decisive role in this stabilization in terms of liquidity provision through a sharp expansion of repo operations (and changes in amounts, terms, counterparties, and eligible instruments), the purchases of public and private debt, and the reduction in bank reserve requirements. In this respect, there is now abundant aggregate liquidity and significant improvements in the liquidity position of investment funds. In this context, the main vulnerability factor for financial stability in the short term is still the high degree of uncertainty surrounding loan quality. First, the future trajectory of the number of people infected and deceased by the virus and the possible need for additional health measures is uncertain. For that reason, there is also uncertainty about the path for economic recovery in the short and medium term. Second, the degree to which the current shock will be reflected in loan quality once the risk materializes in banks’ financial statements is uncertain. For the time being, the credit risk heatmap (Graph B) indicates that non-performing and risky loans have not shown major deterioration, but past experience indicates that periods of sharp economic slowdown eventually tend to coincide with rises in non-performing loans: the calculations included in this report suggest that the impact of the recession on credit quality could be significant in the short term. This is particularly worrying since the profitability of credit establishments has been declining in recent months, and this could affect their ability to provide credit to the real sector of the economy. In order to adopt a forward-looking approach to this vulnerability, this Report presents several stress tests that evaluate the resilience of the liquidity and capital adequacy of credit institutions and investment funds in the event of a hypothetical scenario that seeks to simulate an extreme version of current macroeconomic conditions. The results suggest that even though there could be strong impacts on the credit institutions’ volume of credit and profitability under such scenarios, aggregate indicators of total and core capital adequacy will probably remain at levels that are above the regulatory limits over the horizon of a year. At the same time, the exercises highlight the high capacity of the system's liquidity to face adverse scenarios. In compliance with its constitutional objectives and in coordination with the financial system's security network, Banco de la República will continue to closely monitor the outlook for financial stability at this juncture and will make the decisions that are necessary to ensure the proper functioning of the economy, facilitate the flow of sufficient credit and liquidity resources, and further the smooth operation of the payment systems. Juan José Echavarría Governor