This level is 1 pp of GDP higher than the average volume of this type of investment during the crisis. In any event, foreign direct investment in Spain was impacted to a lesser extent than portfolio investment during the recession, with no divestment recorded in any year, in contrast to what occurred with portfolio investment. That reveals its greater stability compared with other forms of international investment. Another notable characteristic of the recent trend of this item is the decline in the relative weight of these capital inflows in the form of debt liabilities – which comprise intra-group loans and have scarcely accounted for 12% of the total since 2013, compared with over 30% during the pre-crisis years (average between 1999 and 2007) – and the increase in investment in the form of equity. Thus, while in recent years the volume of foreign direct investment has, in terms of GDP, been around 1.5 pp below that observed during the pre-crisis expansion, its composition is sounder, since it is less vulnerable to adverse shocks. Challenges The future outlook for the foreign sector will be influenced by protectionist tensions and by the uncertainty still surrounding the final shape of EU-United Kingdom relations in the wake of Brexit. On the evidence available, the protectionist tensions between the United States and China may be expected to affect global trade flows in two ways: on one hand, a notable direct impact via the global value chains; and on the other, indirect adverse repercussions via their effects on global confidence and investment.
Temporary price level target Yellen's predecessor as chairman of the Federal Reserve, Ben Bernanke, has proposed a solution that can be regarded as a special application of a makeup strategy. 24 This is based on the central bank under certain circumstances not having a target for inflation, but instead for the development of the price level. The difference may appear subtle, as inflation is the change in the price level, but it is potentially quite important. Let us assume that both the inflation target and the target increase for the price level is 2 per cent. If, in an inflation-targeting regime, one has an inflation rate that undershoots the 2 per cent target for a period of time, it is the central bank's task to bring it back on target. The fact that inflation has deviated from the target before is not important – “bygones are bygones”. But if it is instead the development of the price level that is the target and inflation deviates from 2 per cent, then this must be “made up for”. The principle is thus the same as Yellen's makeup strategy, but here one has clarified in advance that the target refers to the price level rather than inflation. The differences between a price level target and an inflation target is illustrated in Figure 7. 25 If something unexpected occurs in an inflation-targeting regime that causes inflation to be lower than the target, it is enough to bring inflation back to 2 per cent again (the bottom right figure).