Academic literature on the topic 'Housing Demand (Economic theory) Utility theory'

This paper aims to advance the understanding of the micro-economic foundations of tourism demand theory, particularly through bringing out some of the implications of the tour characteristics approach to utility analysis, and also through explicitly linking the micro-economic theory of the individual tourist to the aggregate level demand models as actually estimated. Important implications of the tour characteristics theory are that it yields theoretical rationales for the importance of market segmentation of tourism demand, and for tourism product differentiation. Consideration of the aggregation issues in the particular context of tourism demand shows aggregation to be justified and feasible when the market is segmented. Market segmentation is shown to be theoretically important for good tourism demand models, supporting its generally observed practical usefulness. Alternatively, aggregation can be justified through a random utility argument that assumes independence of individuals' tour decisions.

The mismatch between the supply and demand of online-listed rental housing (ORH) is an important factor restricting the operational efficiency of online rental service platforms. However, extant literature pays little attention to this problem. This study proposes an ORH multiattribute supply and demand matching decision model based on the perceived utility of matching both sides of this market. The model considers the multiattribute information of ORH, such as area, transportation, rent, room, and interior decoration, and quantifies their perceived utility values based on the theory of disappointment. Thereafter, we construct the matching decision model and verify it for feasibility by applying it to Shanghai’s ORH supply and demand information—our empirical case. The results show that this method can be applied to online rental housing platforms and meet the supply and demand matching requirements to the greatest extent. The constructed model takes into account the perceptions of both supply and demand parties, may promote the effective matching of ORH supply and demand, and bears theoretical implications for the improvement of rental housing matching in ORH platforms.

Purpose The purpose of this paper is to critically assess the assumptions regarding human behaviour in orthodox neoclassical economic theory. The orthodox neoclassical economic theory prescribes rational models of human behaviour, but the strictness of the criteria, developed to promote theoretical consistency and conceptual elegance, commonly fails to fully accommodate all of the empirical material. To save the core of the orthodox neoclassical economic theory research program and to neutralize and mute criticism regarding its predictive failures, its proponents engage in expedient theorizing, the expansion of the initial theoretical framework by adding ad hoc hypotheses and/or including additional explanatory factors; in many cases, dismissed as “unnecessary complications” (as in the case of morality and ethics – two conspicuously “non-economic” concepts) in the initial formulation of theoretical propositions of the core theories. Design/methodology/approach The paper reviews a body of heterogeneous literature to introduce and examine the use of expedient theorizing in economic thinking. Findings In the present case, the hyperrationalist axiom regarding the efficacy of calculative practices to maximize individual utility is accompanied by moralist concerns (and, by implication, corrective and disciplinary action) regarding the failure to adhere to such prescriptions. Expedient theorizing, thus, becomes a key mechanism in the political economy of truth that currently grants orthodox neoclassical economic theory significant authority to inform policy-making in substantial ways and considerable prestige. Originality/value The orthodox neoclassical economic theory constitutes the blueprint for policy-making and institutional change, and, therefore, the key economic ideas being the constitutive elements of the contemporary economy demand scholarly attention. The paper thus points at theoretical inconsistencies in the orthodox neoclassical economic theory and introduces the concept of expedient theorizing as its remedy.

This paper examines key aspects of the behavior of housing demand from a sustainable standpoint. Most studies have mainly focused on housing supply, looking at quantitative predictions without considering the qualitative relationship found between housing values and housing demand on a sustainable and microeconomic scale. We used a multicriteria decision methodology (analytic hierarchy process—AHP) for the analysis of preferences in demand, based on the theory of multi-attribute utility of housing, to determine the relative importance of each characteristic of housing and its influence on the decision-making process. For this purpose, we carried out the study over three main groups of stakeholders in the housing market: real estate surveyors, real estate agents, and housing buyers (the latter representing the housing demand). Results show that although there might be some slight discrepancies among the three groups in the decision-making process and the weighting of housing attributes, the three groups agree in most of the process, especially when defining the criteria and the importance that each criterion has on the process of valuation. This study provides important managerial and sustainable implications for the real estate market related to urban public policy, as we highlight which criteria are most preferred.

This paper raises an approach to the study of consumer behaviour and markets with a particular emphasis on agricultural commodities. It develops an analysis of demand for certain products during a recent economic recession in Spain by showing the behaviour of some of them as Giffen goods in some years. According to the theory of Giffen demand, there is a direct (positive) relationship between price and the quantity demanded. Thus, the income effect outweighs the substitution effect. The main contributions of this work can be summarized in the next three points: 1) This paper studies the consumer behaviour from a Giffen perspective, beyond a traditional and rational utility approach; 2) It also suggests a framework to analyse several socioeconomic proposals and theories related to the sustainability and Human Rights-based ethic level (intrinsic to Giffen behaviour); 3) Finally, this theory is a significant contribution to design better economic policies. The analysis of Giffen phenomenon has greater explanatory power than the classical theory of Marshall. It also helps to reveal a number of important effects that are usually ignored and that could contribute to clarify some current economic phenomena.

The article develops methods for constructing economic (analytical) indexes in the framework of the holistic theory of market demand, built in recent years. By this, the economic indexes presented in the world literature within the framework of the theory of individual demand and, accordingly, related to households, acquire practical value.The introduction provides a brief overview of the main problems of modern indexology and the implementation of an economic approach dating back to the classical work of 1924 by the Soviet statistician A.A. Konüs. The properties of the most well-known «formula» indexes of Laspeyres, Paasche, and Fischer with respect to the fulfillment of the Fisher test criteria are described. These indexes play an important role in the methods proposed by the authors for constructing analytical indexes, which are determined through the function of consumer expenditures. The latter is determined by a utility function that rationalizes trade statistics. The rationalizing utility function is constructed ambiguously, and the corresponding task should be specified. Methods for its solution are proposed, developed within a non-parametric demand analysis of Afriat-Varian. The core of this analysis is the system of linear Afriat’s inequalities that determine the values of the utility function and marginal utility corresponding to statistical demand. This system can be inconsistent and unstable with respect to variations of non-exact demand statistics. In the case of compatibility, inequalities have many solutions, and the choice of different solutions of inequalities gives different values of analytical indexes. The authors suggest three types of tasks for the stable solution of Afriat’s inequalities, which define indexes with characteristics of optimism (low price indexes and high quantity indexes), pessimism (vice versa) and objectivity.Therefore, the problem of increasing the objectivity of consumer demand indexes receives a theoretically justified toolbox methods for calculating analytical market demand indexes that take into account, in contrast to formula indices, consumer preferences.

In this article, we demonstrate that a quantal response statistical equilibrium approach to the US housing market with the help of the maximum entropy method of modeling is a powerful way of revealing different characteristics of the housing market behavior before, during and after the recent housing market crash in the US. In this line, a maximum entropy approach to quantal response statistical equilibrium model (QRSE) is employed in order to model housing market dynamics in different phases of the most recent housing market cycle using the S&P Case Shiller housing price index for 20 largest- Metropolitan Regions, and Freddie Mac housing price index (FMHPI) for 367 Metropolitan Cities for the US between 2000 and 2015. Estimated model parameters provide an alternative way to understand and explain the behaviors of economic agents, and market dynamics by questioning the traditional economic theory, which takes assumption for the behavior of rational utility maximizing representative agent with self-fulfilled expectations as given.

Alonso's bid-rent theory and the discrete-choice random-utility theory appear in the literature as well-established alternative frameworks to model urban land use. As both approaches share the support of microeconomic theory, the main issue addressed in this paper is the theoretical comparison of the two approaches. It is demonstrated that in perfectly competitive land markets these approaches are equivalent, therefore they should be understood as complementary rather than alternative. The case of markets subject to speculative land prices is then explored for the cases of speculative supply and/or speculative demand, with the discovery that both approaches are theoretically equivalent in every case studied, thus extending the previous conclusion for the general case. These conclusions provide the base for an integrated and more comprehensive urban economic theory and for the bid-choice land-use model.

Thesis (Ph. D.)--University of Oregon, 2007.
Typescript. Includes vita and abstract. Includes bibliographical references (leaves 109-115). Also available for download via the World Wide Web; free to University of Oregon users.

The main thesis of these essays is that social phenomena are different from psychological phenomena and thus social sciences do not belong to behavioural sciences. Chapter 1 introduces the fundamental problem of the rational choice theory ("Macaulay's problem"): either the theory is empirical and false or it is without empirical content and true. Various suggested solutions to this problem are reviewed and criticized. It is argued that the problem is evaded once it is admitted that rational choice theory does not attempt to explain behaviour. It was developed to explain decreasing individual demand and its extension to behavioural sciences is illegitimate. In Chapter 2 the difference between the interpretation of rationality in choice theory and demand theory is shown. It is argued that choice theory must adopt the agent's point of view, while demand theory proceeds from the point of view of an observer. Chapter 3 applies the argument to the problem of indifference ("Nozick's problem"): it claims that choice theory must adopt strict ordering of alternatives because indifference is already accounted for in the description of the choice alternatives. The difference between the consumer perception and the objective price-quantity relation embodied in the demand function is further explored in Chapter 4 on the example of the Rothbardian demand theory. It is argued that the law of marginal utility defined in terms of subjective units (i.e. units relevant to the consumer) does not imply nonincreasing demand. Chapter 5 is complementary to the previous and attempts to answer the question, whether the concept of marginal utility is compatible with ordinalism. Finally, Chapter 6 discusses on the methodological level the difference between behavioural sciences and economics. It argues that the difference can be conveniently described with the help of Popper's concepts of 'World 2'and 'World 3'.

Housing and mortgage markets sit at the intersection of growth regimes and the welfare state, as they are engines for economic growth and fulfill important social functions. This chapter shows how the different linkages between housing finance, the welfare state, and growth regimes shape the ways in which policy-makers utilize housing finance policies as growth strategies. In demand-led economies relying on credit and consumption, such as the United States and the United Kingdom, policy-makers can utilize fiscal, off-budget, and monetary policies as “financialized” growth strategies to stimulate housing demand, credit, and consumption. Countries based on export manufacturing, such as Germany, are complementary to conservative housing finance policies that restrain housing and domestic demand to secure cost competitiveness. To illustrate these arguments, the chapter details the contrasting political developments of housing finance policies as growth strategies in the United States and Germany since the 1970s.

In this chapter, we present a survey on some of the commercial players in the Grid industry, existing research done in the area of market-based Grid technology and some of the concepts of dynamic pricing model that we have investigated. In recent years, it has been observed that commercial companies are slowly shifting from owning their own IT assets in the form of computers, software and so forth, to purchasing services from utility providers. Technological advances, especially in the area of Grid computing, have been the main catalyst for this trend. The utility model may not be the most effective model and the price still needs to be determined at the point of usage. In general, market-based approaches are more efficient in resource allocations, as it depends on price adjustment to accommodate fluctuations in the supply and demand. Therefore, determining the price is vital to the overall success of the market.

Chapter 2 introduces readers to micro-economic theory of utility, rational choice, and demand and supply. This chapter explains to readers why markets for healthcare goods and services fail and why this failure is so spectacular in the case of preventive goods and services. The chapter introduces readers to the need for economic evaluation in public health to guide the allocation of scarce public resources towards cost-effective prevention initiatives. This chapter goes on to explain the purpose of economic evaluation and its relationship to key concepts such as scarcity, choice, allocative efficiency, technical efficiency, and opportunity cost in health economics. With relevance to public health, readers are introduced to incremental cost-effectiveness ratios (ICERs), cost-effectiveness planes, and cost-effectiveness acceptability curves (CEACs), net monetary benefit (NMB), and their relationship to payer thresholds.

The structure of the electricity system includes universal access to electricity that is adequate, available, reliable, affordable, legal, convenient, healthy, and safe and the efficient (inefficient) use of the electricity. Quality of access also influences clean energy technologies and electrical appliance purchase, ownership, use and perceived value (uptake, hereafter). Also, improved uptake assists in closing systemic gaps between rural and urban areas and grid and off-grid communities. Rwanda is projected to attain full electrification by 2024 (inclusive of all sectors: consumptive, productive and services). In this context, the East African country has articulated support mechanisms for off-grid market players through technical assessments and siting incentives. However, studies that focus on characterising diffusion and uptake of clean energy technologies and electrical appliances in mini-grid sites (market) are crucial to understand the emerging trends in off-grid rural electrification. This chapter contributes to this emerging discourse by proposing a four-fold demand side characterisation approach which (i) conducts a systemic review of literature to identify emerging off-grid themes as they relate to the multi-tier framework (MTF) and vice-versa, (ii) uses existing data to characterise the off-grid market (based on a typical village load), (iii) demonstrates the tariff regime changes using two payment methodologies (willingness to pay (WTP) and ability to pay (ATP)) and (iv) projects the 2024–2032 consumptive energy demand (using a simplified relation between appliance, it’s rating and duration of use). Results of this characterisation demonstrate global and local level (glo-cal) literature gaps meriting a localised MTF assessment. The purpose of the localised assessment reported in this Chapter was therefore to understand appliance uptake gaps at the user level. The typical village load is basic (implying low energy demand). Ceteris paribus, higher WTP and ATP by users yield higher tariffs. However, a high ATP is a business sustainability determinant than a high WTP. Because energy consumption is also dependent on how efficiently it is used by those with access, the Chapter discusses appliance efficiency as a partial definition of sustainable energy and also as an example of sustainable energy. Then, demand stimulation pathways addressing wider systemic opportunities at the intersection of the theory of change and the theory of agency and risk reduction in markets, investments and policy (derisking markets, investments and policy) are discussed. The first pathway focuses on women and youth participation in productive use activities. The second pathway highlights strategies for appliance financing such as cost-sharing and micro-credit. The final pathway considers economic activity stimulation which has multiplier effects on energy demand and consequently energy-using appliances uptake. The implications for Sustainable Citizens and markets, investments and policy innovations are contextualised in the Sustainable Energy Utility business model.

As environmental sustainability becomes increasingly integrated into the mainstream values, previously ignored externalities may be expected to enter into the economic valuation process. This is already evident, as an illustration, in the price that several entities are beginning to attach to carbon (with examples including cap-and-trade, carbon taxes, etc). In this paper, we present a basic economic partial equilibrium model to evaluate such externalities within the context of a particular industry. We begin by discussing how economic values may be attached to different externalities, and focus our analysis on carbon as an example of an environmental impact which may need to get internalized within the cost structure of a given organization. With such a new cost structure in place, we use historical estimates of the elasticity of supply and demand within a given industry to evaluate how the costs may propagate up and down the value chain. For example, how much of the costs are likely to get absorbed internally within a supply chain? What fraction of costs might a manufacturer reasonably expect to pass along to downstream consumers? With such estimates in place, we then predict using microeconomic theory how the supply-demand equilibrium within a particular market may shift. We discuss how such a simple approach to evaluating externalities may be used to simulate the effects of different policy choices, and illustrate the approach through an example case study of the electric utility industry. We conclude with a discussion of future work that seeks to expand considerations beyond the electric utility industry and methods to extend this simplified modeling framework.

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%.