Academic literature on the topic 'Utility index'

AbstractIn this article, we study the problem of optimal index insurance design under an expected utility maximization framework. For general utility functions, we formally prove the existence and uniqueness of optimal contract and develop an effective numerical procedure to derive the optimal solution. For exponential utility and quadratic utility functions, we obtain analytical expression of the optimal indemnity function. Our results show that the indemnity can be a highly nonlinear and even non-monotonic function of the index variable in order to align with the actual loss variable so as to achieve the best reduction in basis risk. Due to the generality of model setup, our proposed method is readily applicable to a variety of insurance applications including index-linked mortality securities, weather index agriculture insurance, and index-based catastrophe insurance. Our method is illustrated by numerical examples where weather index insurance is designed for protection against the adverse rice yield using temperature and precipitation as the underlying indices. Numerical results show that our optimal index insurance significantly outperforms linear-type index insurance contracts in terms of basis risk reduction.

ObjectiveThe aim of the study was to assess the utility of a novel amyotrophic lateral sclerosis (ALS) diagnostic index (ALSDI).MethodsA prospective multicenter study was undertaken on patients presenting with suspected ALS. The reference standard (Awaji criteria) was applied to all patients at recruitment. Patients were randomly assigned to a training (75%) and a test (25%) cohort. The ALSDI was developed in the training cohort and its diagnostic utility was subsequently assessed in the test cohort.ResultsA total of 407 patients were recruited, with 305 patients subsequently diagnosed with ALS and 102 with a non-ALS mimicking disorder. The ALSDI reliably differentiated ALS from neuromuscular disorders in the training cohort (area under the curve 0.92, 95% confidence interval 0.89–0.95), with ALSDI ≥4 exhibiting 81.6% sensitivity, 89.6% specificity, and 83.5% diagnostic accuracy. The ALSDI diagnostic utility was confirmed in the test cohort (area under the curve 0.90, 95% confidence interval 0.84–0.97), with ALSDI ≥4 exhibiting 83.3% sensitivity, 84% specificity, and 83.5% diagnostic accuracy. In addition, the diagnostic utility of the ALSDI was confirmed in patients who were Awaji negative at recruitment and in those exhibiting a predominantly lower motor neuron phenotype.ConclusionThe ALSDI reliably differentiates ALS from mimicking disorders at an early stage in the disease process.Classification of evidenceThis study provides Class I evidence that for patients with suspected ALS, the ALSDI distinguished ALS from neuromuscular mimicking disorders.

Reliable and safe provision of sedation and general anesthesia is dependent on continuous vigilance of patient’s sedation depth. Failure to do so may result in unintended oversedation or undersedation. It is a common practice to observe sedation depth by applying subjective sedation scales and in case of general anesthesia, practitioner is dependent on vital sign assessment. The Bispectral Index System (BIS) is a recently introduced objective, quantitative, easy to use, and free from observer bias, and clinically useful tool to assess sedation depth and it precludes the need to stimulate the patient to assess his sedation level. The present article is an attempt to orient the readers towards utility and validity of BIS for sedation and general anesthesia in pediatric dentistry. In this article, we attempt to make the readers understand the principle of BIS, its variation across sedation continuum, its validity across different age groups and for a variety of sedative drugs.

With the entry into force of the Constitution of Peru of 1993, the economic model of social market economy, which was accompanied by an institutional reform, creating four (4) regulators of utilities and one (1) competition agency, was established. The economic model of social market economy, guarantees free competition in the market as a general rule, establishing a regulatory framework for public services that before the reform, were managed directly by the State. Thus, in this paper we will learn how to set up the Peruvian institutional framework and what are the main similarities and differences between competition and regulation, for which we will detail the functions of the competition agency and regulatory bodies as well as interaction between the two.
Con la entrada en vigencia de la Constitución Política del Perú de 1993, se estableció el modelo económico de economía social de mercado. Como parte del mismo, se realizaron una serie de reformas institucionales del Estado, creándose cuatro organismos reguladores de los servicios públicos y una agencia de competencia. El modelo económico de economía social de mercado garantiza la libre competencia en el mercado como regla general, estableciendo un marco regulatorio para los servicios públicos que, antes de la reforma, eran gestionados directamente por el Estado. Así, en el presente trabajo podremos conocer cómo se ha establecido el marco institucional peruano y cuáles son las principales similitudes y diferencias de la competencia y la regulación, para lo que detallaremos las funciones de la agencia de competencia y la de los organismos reguladores, así como la interacción que existe entre ambos.

Preventing damages from flooding is critically important for city managers and planners.Efforts in protecting infrastructure from flooding are often coupled with building hydrologicmodels to provide predictions of what is likely to happen during storm events. As land usechanges, these models must be updated, which is more challenging with sophisticated models. Ateam of researchers from universities in Utah and Wyoming have been developing tools forwater management in the Intermountain West as part of a collaborative NSF research grantcalled CI-WATER. In particular, a free and open source web platform called Tethys has beendeveloped to support the development and hosting of hydrologic web applications. Tethys wasused to develop a prototype application that uses a GSSHA runoff model and allows users tochange land-use inputs to simulate the impact on a watershed for any type of land use change.The application also provides a method to run the edited model and produces a comparisonreport of before-and-after runoff and water depth as part of a decision-support framework.

How to identify effective teachers who improve student achievement despite diverse student populations and school contexts is an ongoing discussion in public education. The need to show communities and parents how well teachers and schools improve student learning has led districts and states to seek a fair, equitable and valid measure of student growth using student achievement. This study investigated a two stage hierarchical model for estimating teacher effect on student achievement. This measure was entitled a Classroom Effectiveness Index (CEI). Consistency of this model over time, outlier influences in individual CEIs, variance among CEIs across four years, and correlations of second stage student residuals with first stage student residuals were analyzed. The statistical analysis used four years of student residual data from a state-mandated mathematics assessment (n=7086) and a state-mandated reading assessment (n=7572) aggregated by teacher. The study identified the following results. Four years of district grand slopes and grand intercepts were analyzed to show consistent results over time. Repeated measures analyses of grand slopes and intercepts in mathematics were statistically significant at the .01 level. Repeated measures analyses of grand slopes and intercepts in reading were not statistically significant. The analyses indicated consistent results over time for reading but not for mathematics. Data were analyzed to assess outlier effects. Nineteen statistically significant outliers in 15,378 student residuals were identified. However, the impact on individual teachers was extreme in eight of the 19 cases. Further study is indicated. Subsets of teachers in the same assignment at the same school for four consecutive years and for three consecutive years indicated CEIs were stable over time. There were no statistically significant differences in either mathematics or reading. Correlations between Level One student residuals and HLM residuals were statistically significant in reading and in mathematics. This implied that the second stage of the model was consistent for all students. Much is still unknown concerning teacher effect on student achievement, especially when confined to teacher activity within one school year. However, results indicate the utility of using statistical modeling of student achievement within the context of teacher accountability.

This thesis aims to provide detailed investigation into the role and functioning of the FTSE-100 stock index futures contract, by examining four interrelated issues. Chapter 1 reviews the literature, demonstrating that stock index futures can increase investor utility by offering hedging and investment opportunities. Further, the price discovery role of futures is discussed. Chapter 2 investigates the risk return relationship for the FTSE-100 contract within a CAPM framework. While CAPM adequately explains returns prior to October 1987, post-crash the contract is riskier and excess returns and a day of the week effect are evident. Chapter 3 examines the impact of futures on the underlying spot market using GARCH, which allows examination of the link between information and volatility. While spot prices are more volatile post-futures, this is due to more rapid impounding of information. The view that futures destabilise spot markets and should be subject to further regulation is questioned. Chapter 4 examines futures market efficiency using the Johansen cointegration procedure and variance bounds tests which are developed here. Results suggest futures prices provide unbiased predictions of future spot prices for 1, 2 and 4 months prior to maturity of the contract. For 3, 5 and 6 months prior to maturity the unbiasedness hypothesis does not hold. Chapter 5 discusses the major role of futures; hedging. Hedge ratios and hedging effectiveness are examined in relation to duration and expiration effects. Hedge ratio stability is also examined. Finally, hedging strategies based on historical information are examined. Results show there are duration and expiration effect, hedge ratios are stationary and using historical information does not greatly reduce hedging effectiveness. The FTSE-100 contract is shown to be a highly effective means by which to hedge risk. Chapter 6 provides a summary and concluding remarks concerning the relevance of the research carried out here.

COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIOR
Esta dissertação apresenta, via um estudo de caso, o desenvolvimento de um modelo de decisão multicritério para a definição do Índice de Qualidade de Fornecimento de Energia Elétrica por uma distribuidora. O estudo desenvolveu um processo interativo, apoiado pela abordagem multicritério e software MACBETH. Este trabalho apresenta as diferentes componentes deste processo interativo sociotécnico. MACBETH requer apenas julgamentos qualitativos sobre as diferenças de atratividade entre elementos para gerar pontuações e pesos em cada critério. Esse tipo de procedimento de julgamento motivou discussão e aprendizagem no âmbito do grupo de trabalho, contribuindo para o desenvolvimento de um sistema de valores em grupo. O modelo multicritério desenvolvido é suficientemente genérico para ser facilmente aplicável a outras distribuidoras de energia elétrica. O índice proposto pode ser adaptado e servir como medida de comparação da qualidade dos serviços prestados entre as diversas distribuidoras. Desta forma, o presente trabalho também se apresenta como uma contribuição ao órgão regulador, que vem estudando a possibilidade de se definir um indicador de qualidade que seja mais robusto e que leve em consideração outros aspectos dos serviços de fornecimento de energia.
This dissertation presents, through a case study, the development of a multicriterion decision model to create a Quality Index to evaluate the service provided by a distribution electricity utility. The study used an iterative process following the approach proposed by MACBETH software. The thesis shows the different components of this social-technical process adopted. MACBETH requires solely qualitative judgments about the attractiveness differences among the elements in order to generate the weights and the marks for each criterion. This type of judgment procedure motivates the discussion and the learning process among the members of the working group, which results in a real contribution to development of a group value system. The multicriterion model developed is general enough to allow its implementation to others distribution electricity utilities. This proposed index can be easily adapted and acts as a comparison measure of the quality of the services provided by utilities. Therefore, the present thesis also brings about a contribution to the regulator agent which is searching for quality index that is robust enough to be implemented in any distributing utility.

An estimated 60.25% of offenders have a history of traumatic brain injury (TBI). There is currently no established valid or reliable screening tool for identifying female prisoners with a TBI and associated cognitive impairment available in the UK. Using a cross-sectional design, this study aimed to investigate the retest reliability and construct validity of the Brain Injury Screening Index (BISI). Convergent validity was explored using self-report measures of mood and neurodisability, as well as a battery of neuropsychological assessments of cognitive functioning. Of a planned sample of 73 participants, preliminary data from 23 participants has been analysed. 69.56% of participants were identified as having a history of TBI, with a mean of 2.09 TBIs. Intraclass correlation coefficients reached statistical significance for six of 10 identified key clinical indicators on the BISI. The BISI variables did not reach statistically significant convergence with most of the test battery. Two of the four BISI summary variables demonstrated correlations in the hypothesised directions across the full assessment battery, however only one BISI variable reached statistical significance with one subscale in the battery. Analyses provide support for further investigation into the construct validity and retest reliability of the BISI with a larger sample. The implications of these findings, particularly in refining the BISI, and future research and practice are considered.

The chapter provides an overview of the methods and techniques employed by economic statisticians in compiling measures of real expenditure for use in making temporal and spatial comparisons of economic welfare. The role of money-metric utility in making price and welfare comparisons is explored. Temporal measures of price change based on the Konus cost-of-living index and the associated measures of welfare change for individuals and groups of individuals are discussed. Links between the commonly used Laspeyres, Paasche, Fisher, and Tornqvist index numbers and the Konus index-based measures of price and real expenditure change are established. A section of the chapter is devoted to spatial price comparisons where heterogeneity in prices, consumption, and preferences poses challenges for statisticians. Multilateral index number methods based on the money-metric utility used in spatial and cross-country price and welfare comparisons including the Geary, Gini-Éltetö-Köves-Szulc, and spatial chaining methods are canvassed.

AbstractDespite enduring political rhetoric that promotes Australia as ‘the lucky country’ and ‘the land of the fair go’, recent decades have seen a noticeable increase in levels of income inequality. This growing economic divide has driven housing prices up and left lower-income families unable to access the housing market in inner-city locations. In contrast to other countries, Australia’s socioeconomic segregation does not overlap with ethnic segregation. Australia’s highly regulated immigration program has resulted in a relatively well-educated and employable foreign-born population who largely reside in middle-income neighbourhoods. These particularities make Australia an interesting context to explore patterns of socioeconomic segregation over time. In this chapter, we will utilise both traditional measures of segregation (such as the dissimilarity index) as well more spatialised measures (such as location quotients and Local Morans I) to assess socioeconomic segregation at the local level. Drawing on four waves of census data (2001, 2006, 2011 and 2016), we explore how socioeconomic segregation has changed over time across nearly 500 neighbourhoods in Melbourne. We further examine the degree to which socioeconomic segregation aligns with ethnic segregation patterns and levels in this city. We find patterns of socioeconomic segregation remain relatively unchanging over time in Melbourne. Additionally, our findings highlight important differences in patterns and levels of socioeconomic and ethnic segregation in the Australian context.

In this report, we have evaluated the performance of nearly 40 global climate models (GCMs) participating in Phase 6 of the Coupled Model Intercomparison Project (CMIP6). The focus is on the northern European area, but the ability to simulate southern European and global climate is discussed as well. Model evaluation was started with a technical control; completely unrealistic values in the GCM output files were identified by seeking the absolute minimum and maximum values. In this stage, one GCM was rejected totally, and furthermore individual output files from two other GCMs. In evaluating the remaining GCMs, the primary tool was the Model Climate Performance Index (MCPI) that combines RMS errors calculated for the different climate variables into one index. The index takes into account both the seasonal and spatial variations in climatological means. Here, MCPI was calculated for the period 1981—2010 by comparing GCM output with the ERA-Interim reanalyses. Climate variables explored in the evaluation were the surface air temperature, precipitation, sea level air pressure and incoming solar radiation at the surface. Besides MCPI, we studied RMS errors in the seasonal course of the spatial means by examining each climate variable separately. Furthermore, the evaluation procedure considered model performance in simulating past trends in the global-mean temperature, the compatibility of future responses to different greenhouse-gas scenarios and the number of available scenario runs. Daily minimum and maximum temperatures were likewise explored in a qualitative sense, but owing to the non-existence of data from multiple GCMs, these variables were not incorporated in the quantitative validation. Four of the 37 GCMs that had passed the initial technical check were regarded as wholly unusable for scenario calculations: in two GCMs the responses to the different greenhouse gas scenarios were contradictory and in two other GCMs data were missing from one of the four key climate variables. Moreover, to reduce inter-GCM dependencies, no more than two variants of any individual GCM were included; this led to an abandonment of one GCM. The remaining 32 GCMs were divided into three quality classes according to the assessed performance. The users of model data can utilize this grading to select a subset of GCMs to be used in elaborating climate projections for Finland or adjacent areas. Annual-mean temperature and precipitation projections for Finland proved to be nearly identical regardless of whether they were derived from the entire ensemble or by ignoring models that had obtained the lowest scores. Solar radiation projections were somewhat more sensitive.

This report presents the results of RTI International Education’s study on teachers' guides across 13 countries and 19 projects. Using quantitative and qualitative methods, we examine how teachers’ guides across the projects differ and find substantial variation in the design and structure of the documents. We develop a scripting index so that the scripting levels of the guides can be compared across projects. The impact results of the programs that use teachers’ guides show significant impacts on learning outcomes, associated with approximately an additional half year of learning, showing that structured teachers’ guides contribute to improved learning outcomes. During observations, we find that teachers make a variety of changes in their classroom instruction from how the guides are written, showing that the utilization of structured teachers’ guides do not create robotic teachers unable to use their own professional skills to teach children. Unfortunately, many changes that teachers make reduce the amount of group work and interactivity that was described in the guides, suggesting that programs should encourage teachers to more heavily utilize the instructional routines designed in the guide. The report includes a set of research-based guidelines that material developers can use to develop teachers’ guides that will support effective instructional practices and help improve learning outcomes. The key takeaway from the report is that structured teachers' guides improve learning outcomes, but that overly scripted teachers' guides are somewhat less effective than simplified teachers' guides that give specific guidance to the teacher but are not written word for word for each lesson in the guide.

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%.

Macroeconomic Summary Overall inflation (1.61%) and core inflation (excluding food and regulated items) (1.11%) both declined beyond the technical staff’s expectations in the fourth quarter of 2020. Year-end 2021 forecasts for both indicators were revised downward to 2.3% and 2.1%, respectively. Market inflation expectations also fell over this period and suggested inflation below the 3% target through the end of this year, rising to the target in 2022. Downward pressure on inflation was more significant in the fourth quarter than previously projected, indicating weak demand. Annual deceleration among the main groups of the consumer price index (CPI) was generalized and, except for foods, was greater than projected in the October report. The CPI for goods (excluding foods and regulated items) and the CPI for regulated items were subject to the largest decelerations and forecasting discrepancies. In the first case, this was due in part to a greater-than-expected effect on prices from the government’s “VAT-fee day” amid weak demand, and from the extension of some price relief measures. For regulated items, the deceleration was caused in part by unanticipated declines in some utility prices. Annual change in the CPI for services continued to decline as a result of the performance of those services that were not subject to price relief measures, in particular. Although some of the overall decline in inflation is expected to be temporary and reverse course in the second quarter of 2021, various sources of downward pressure on inflation have become more acute and will likely remain into next year. These include ample excesses in capacity, as suggested by the continued and greater-than-expected deceleration in core inflation indicators and in the CPI for services excluding price relief measures. This dynamic is also suggested by the minimal transmission of accumulated depreciation of the peso on domestic prices. Although excess capacity should fall in 2021, the decline will likely be slower than projected in the October report amid additional restrictions on mobility due to a recent acceleration of growth in COVID-19 cases. An additional factor is that low inflation registered at the end of 2020 will likely be reflected in low price adjustments on certain indexed services with significant weight in the CPI, including real estate rentals and some utilities. These factors should keep inflation below the target and lower than estimates from the previous report on the forecast horizon. Inflation is expected to continue to decline to levels near 1% in March, later increasing to 2.3% at the end of 2021 and 2.7% at year-end 2022 (Graph 1.1). According to the Bank’s most recent survey, market analysts expect inflation of 2.7% and 3.1% in December 2021 and 2022, respectively. Expected inflation derived from government bonds was 2% for year-end 2021, while expected inflation based on bonds one year forward from that date (FBEI 1-1 2022) was 3.2%.