Mr Fazio considers the world economy and finance in 1999
Address by the Governor of the Bank of Italy, Dott. Antonio Fazio, at a conference organised by
AIAF-AIOTE-ASSOBAT-ATIC-FOREX in Verona on 30/1/99.
The effects of the collapse of the Asian currencies in 1997 spilled over to the world economy in
1998; the crisis spread to Russia and other East European countries and to Latin America.
The crisis in Asia followed the sharp decline in domestic demand in Japan. The sudden change in
expectations generated rapid capital outflows and currency depreciations that exceeded some 50% in
Korea and Thailand and 40% in Malaysia and the Philippines. In 1998 the Korean and Thai
currencies recouped half the value they had lost. The Indonesian rupiah lost half its value in 1997
and another 20% of its initial value in 1998.
The economies of Latin America withstood the wave of instability from Asia in 1997 but in 1998
were caught up in the crisis following the devaluation of the rouble. The currencies of Brazil,
Mexico, Venezuela and Chile came under strong downward pressure. The speculative attack of
midJanuary 1999 initially focused on the Brazilian Real.
Argentina has stuck to the exchange rate fixed with the dollar under the institutional arrangement
adopted for the peso. Since the devaluation of 1994, China has maintained a close link with the US
currency.
The swings in share prices in the countries hit by the crisis have paralleled those in exchange rates
but have generally been more pronounced.
In Japan, the stock market fell by a quarter in the last two years and has fallen further in the last few
weeks; the yen first weakened then strengthened considerably in the last part of 1998. Last year the
Korean stock exchange gained as much as it had lost in 1997.
The falls in the currencies and stock exchanges of Asia have been mirrored by rises in the US and
European currencies and stock markets, fuelled in part by the outflow of funds from Asia. Despite its
high initial level, the S&P index rose by 60% in the two years 1997-98. The gains on some
European exchanges were even larger.
The crisis in Latin America
All the major countries of Latin America continued to run large current account deficits in 1998.
Brazil's deficit grew to 4.2% of GDP, and the pattern in Mexico, Argentina and Chile was similar,
with the deficit rising to 3.5, 4.5 and 6.8% of GDP respectively.
The ratio of Brazil's net external debt to GDP is of the order of 25%. In Mexico, Venezuela and
Chile, the ratio is close to 40%, in Argentina to 30%. The debts are mainly denominated in dollars.
In the last few years these economies were marked by rapid rates of growth and lower inflation than
in earlier decades. In several cases budget deficits were substantial.
In some respects there was a repeat of the experience of the Asian countries. A prolonged period of
growth was financed with imports of foreign capital, mostly at short term.
In Asia, the capital inflows had financed investment that in many cases exceeded 30% of GDP in
1997. In Latin America, by contrast, foreign capital also financed the current expenditure of the
private and public sectors; investment fell to around 20% of GDP.
In summer 1998 the stock markets of Brazil, Mexico, Argentina and Chile had already turned
bearish. Interest rates were raised steeply to defend the exchange rate.
The tensions subsequently abated, thanks in part to the reduction in US official interest rates and the
approval of the stabilisation plan agreed by Brazil and the International Monetary Fund. It was
possible for interest rates to come down and shares recouped some of the earlier losses.
Confidence in the exchange rates and stock markets of Latin America and some Asian and East
European countries was undermined in 1998 by the uncertainty surrounding the solution of Russia's
financial problems and the effectiveness of Brazil's stabilisation policies.
The sharp fall on the stock market at the beginning of this year and the collapse of the Real
following the decision to allow it to float halved the dollar value of Brazilian shares. In the days that
followed their prices rebounded, rising by 30% in a single day; subsequently, however, there have
been further falls in the exchange rate and share prices have gyrated.
The world economy
The slowdown in effective demand that began in Asia in mid-1997 gradually affected the rest of the
world.
The Japanese economy, which had been recovering in 1996, grew by only 1.4% in 1997. Growth
remained rapid in North America and the United Kingdom and satisfactory in the continental
European countries. It was particularly slow in Italy: 0.7% in 1996 and 1.5% in 1997.
The crisis that struck in Asia in mid-1997 did not prevent an appreciable increase in consumption,
investment and GDP in the area for the year as a whole; the exception was Thailand, where strains in
the external accounts had already emerged at the end of 1996. Growth in Latin America continued at
a very rapid pace in 1997: 8.6% in Argentina and 7% in Mexico. In Brazil the loss of
competitiveness and subsequently the tensions in the financial and foreign exchange markets slowed
down growth.
In 1997 world exports recorded a particularly large increase of 9.9%, compared with 7% in the
previous year. The demand of the emerging economies, still buoyant, sustained the cycle in the
Anglo-Saxon countries and continental Europe.
The full force of the crisis was felt in 1998 when expansion in world trade fell to 3.3%.
Growth turned sharply negative in Asia, with GDP contracting by 7% in Korea, 7.5% in Malaysia
and 8% in Thailand. The fall in imports and to a lesser extent the rise in exports inverted the sign of
external current account balances for the first time in many years and generated sizable surpluses.
The crisis took on political and institutional overtones in Indonesia, where GDP is estimated to have
contracted by 15%. On the basis of the data available, the Chinese economy appears to have suffered
only a slowdown in growth; the deceleration in the Philippines was more pronounced. Throughout
the area, economic activity tended to stagnate.
Partly owing to the depressed conditions in the rest of Asia, the performance of the Japanese
economy continued to deteriorate in 1998. Investment contracted further, by more than 10%. Signs
of deflation became increasingly evident in prices, domestic demand and business expectations.
In Latin America, too, domestic demand and economic activity gradually slowed down during 1998.
The problems afflicting the Asian, Latin American and Russian economies and the improvement in
their competitiveness as a result of currency devaluations adversely affected demand in the industrial
countries.
The impact on domestic demand and growth was already visible in the exports of the G7 and euro
area countries.
Effective demand remained high in the United States, where the increase in domestic spending was
easily financed with growing imports of saving from the rest of the world and the supply of dollars
on the international market. US demand for goods helped attenuate the crisis in Asia; it has so far
prevented the economies of Latin America from declining faster.
Business confidence nonetheless waned; after rising by 20% in the first quarter and 13% in the
second, investment slowed down further in the second half of the year.
In Japan expectations regarding the economy had already turned down in mid-1997.
In continental Europe, business expectations deteriorated steadily in 1998. The recovery of
investment that had begun in the second quarter of 1997 continued until the early months of last
year; it was brought to a halt in the spring by the persistence of the crisis in Asia and its propagation
to the East European transition economies and Latin America. The growth in GDP also slowed
sharply before recovering slightly.
The climate of households' confidence was less negative.
According to the IMF, output in Germany, France and Italy was well its potential level from 1993
onwards.
The current account of the balance of payments of the euro area continued to show a surplus of 0.8%
of the area's GDP. After rising substantially in 1997, the volume of exports slowed sharply during
1998; the volume of imports also declined markedly.
The cyclical recovery expected in the second part of this year is still uncertain.
The low level of interest rates does not appear sufficient to trigger a widespread increase in
investment. There are still no signs in the area of expectations of a vigorous and sustained recovery
in economic activity in the medium term.
The uncertainty surrounding the recovery of international trade in 1999 is related to the prospect of
only modest growth or even continued recession in the Asian countries affected by the crisis, the
possibility of mounting difficulties in the transition economies and the halt in growth in Latin
America.
Notwithstanding the sharp deceleration in economic growth in some regions, the international trade
imbalances that have contributed to the abnormal increase in world finance and to the recurrent
crises of recent years have not yet been corrected.
The decline in demand and economic activity in 1998 means that many Asian countries risk
performing poorly again in 1999. They will continue to record large surpluses on their external
current accounts. Growth in Latin America will continue, but much more slowly than last year;
current accounts will remain in deficit.
The euro area still has a current account surplus; the US deficit and Japanese surplus are still
growing.
The slowdown of the world economy is stretching into 1999.
Unemployment in Japan, although extremely low in comparison with that of other industrial
countries, is rising sharply. Economic activity was still weak at the end of 1998. The support
provided by monetary policy ceased to be effective a good while ago. Monetary expansion is
nonetheless providing the liquidity needed by the banking system, where the quality of credit
continues to decline. The rescue operation prepared by the Government provides an assurance of
solvency.
It is essential that the planned massive reflation by means of budgetary policy revive domestic
demand and set the economy back on a growth path this year.
It is essential, as indicated by the G7 finance ministers and central bank governors at their meeting in
Washington last October, that the growth in the United States be accompanied by a substantial
recovery of domestic demand in Europe.
It was emphasised that, in order to create expectations favourable to a recovery of investment,
farreaching structural reforms are needed in the labour market and public expenditure.
The United States and Canada, Europe and Japan produce approximately half of gross world output.
They have the resources, or can attract them from the rest of the world, to sustain domestic demand
and strengthen economic activity. There are clear signs of a deficiency of demand, especially for
investment goods, in Europe and Japan.
Only a faster rate of economic expansion in the industrial countries can prevent the world economy
from stagnating and ensure a return to growth.
The growth of money and world finance
In the mid-1980s the bonds circulating in the G10 countries, issued almost entirely by governments,
amounted to $6.3 trillion, or 70% of these countries' domestic product. In 1996 the stock of bonds
had tripled to reach $21.7 trillion; output at current prices had doubled., the ratio had risen to 105%.
The stock of shares increased faster; the value of bonds and shares rose from 116% of GDP in 1985
to 220% in 1996.
The growth in the quantity of money also exceeded that in output; the reduction in the income
velocity of circulation was concentrated in the second half of the 1980s. The rigorous monetary
policies of the 1990s have kept the ratio of the quantity of money to GDP in the G10 countries
unchanged at close to 60%.
The picture changes, with a larger increase in liquidity, if account is taken of cross-border bank
deposits. Interbank deposits and those held by nonbanks grew at an annual rate of 11%. According to
data reported to the Bank for international Settlements, the former amounted to 21% of world GDP
in 1996 and the latter to 6%.
Derivative products have made a decisive contribution to the increase in the liquidity of the world
economy since the early 1990s, when the growth in the quantity of money was brought under tighter
control. Their notional value rose from 25% of world output in 1990 to more than 100% in 1996.
The use of derivatives increases the volume of transactions in financial assets that can be carried out
with the existing money balances: the demand for and supply of securities increases by a multiple of
the available liquidity. Derivatives permit more efficient risk management; but, used improperly,
they entail the risk of instability for market participants.
One fundamental reason for the increase in the market value of shares has been the growth in the
actual and potential liquidity of national and international financial markets.
The reduction in long-term interest rates, fostered by low inflation and a curbing of budget deficits,
can also be traced to the same cause.
The abundant supply of liquidity in the markets is the consequence of the US balance-of-payments
deficit and the monetary expansion in Japan, which accelerated in mid-1995 in the wake of the
Mexican crisis. Following the Asian crisis, large liquid balances were channelled into
dollardenominated instruments and into the European markets.
The Italian economy
The exports of the United States, Japan and the United Kingdom declined in the first half of 1998.
Those of the euro area countries continued to rise, although this was largely due to France and
Germany, which recorded annualised increases of respectively 3.4 and 2.8% compared with the
second half of 1997.
In Italy, the volume of exports contracted in late 1997 and the first few months of 1998, followed by
a temporary recovery. The trend at the end of the year appears to have been downward again.
Imports did not decline until the second half of the year; prices fell significantly.
The surplus on the current account of the balance of payments was to 2.2% of GDP, as against 3.2%
in 1997.
The recovery in investment that had begun in spring 1997 faltered in 1998. Investment in
construction has continued its downward trend. The pick-up in household consumption has
proceeded regularly but at a pace that remains modest.
Industrial production remained broadly unchanged for most of the year. Preliminary estimates for
January 1999 indicate that output will be at about the same level as in January 1998.
Firms' expectations of new orders deteriorated steadily for most of last year. Households'
confidence, though lower in the second half than in the first, remains relatively high.
Thanks to the introduction and extension of forms of flexibility in labour practices, employment has
staged a recovery; the number of part-time and fixed-term contracts has increased considerably. On
the basis of labour force survey data, the number of people employed increased by 0.5% on average
for the year in the Centre and North and by 0.6% in the South. The increase was accounted for
mainly by the weakest groups, women and young people.
Given Italy's low participation rate, however, the number of job seekers has also increased. The
unemployment rate in the Centre and North declined marginally in the 12 months to October, from
7.7 to 7.6%. In the South, unhappily, it increased further, from 22.6 to 23.2%; youth unemployment
in the region rose to a new peak.
The use of saving
Saving is the raw material of investment and growth. The large quantity generated is not all put to
use domestically; it is necessary to create the conditions for it to be turned into investment to the
benefit of employment in Italy.
Analysis of the balance between the formation and use of saving, in a period marked by high
unemployment and sluggish investment, highlights the lack of domestic demand and, indirectly, the
shortfall in competitiveness.
A succession of current account surpluses in the six years from 1993 to 1998 enabled Italy to bring
its net external position into balance. A high level of foreign debt is inappropriate for an advanced
industrial economy and the primary cause of continuous weakening of the exchange rate and
inflation.
The achievement of a sound external position was a necessary condition for stabilising the exchange
rate and consolidating the value of the currency.
In the private sector, the flow of saving declined further in relation to disposable income in 1998; its
use in the domestic economy to the benefit of growth and employment remained inadequate.
The external current account surplus amounted to 45 trillion lire in 1998; in absolute terms it was in
line with the figure for 1995; it was one third less than in 1996 and 1997.
A substantial part of the surplus is regularly reinvested abroad, passing through Italy's financial
accounts.
The "errors and omissions" item of the balance of payments resulted in about half the current
account surplus recorded in 1996 and 1997 not appearing in the national accounts. In 1998 revenues
not officially brought into the country or not recorded in the financial accounts amounted to around
50 trillion lire; they cancelled out the entire current account surplus.
Analysis of officially recorded cross-border capital movements also highlights a reduction in the
surplus and the progressive emergence in 1998 of a deficit of foreign investment in the Italian
financial market.
Inward investment in Italian bonds and shares amounted to 61.5 trillion lire in 1995; in 1996, owing
mainly to the increased liquidity of the international market, the inflow of funds rose to 125 trillion
lire. It remained at about that level in 1997 and then rose to 165 trillion lire last year.
Funds were attracted from abroad by the steady improvement in inflation and the consequent
expectation of lower interest rates. These factors were consolidated and reinforced in 1998, inter alia
by Italy's imminent adoption of the single currency.
Italian portfolio investment abroad has increased more rapidly. Portfolio investment outflows were
substantially less than inflows in both 1995 and 1996. With the reduction in official and market
interest rates, investment abroad increased; owing to the less favourable outlook for profits, inward
investment tended to slow down. In 1997 there was still a net inflow of 7 trillion lire, but in 1998
there was a net outflow of 18 trillion lire.
The proportion of foreign securities in Italians' investment portfolios is still smaller than in other
countries. The process of diversification is bound to continue.
The volume of listed shares in the Italian market is comparatively small. The alignment of Italian
interest rates with those prevailing abroad is beneficial for its effects on the real economy but tends
to reduce the attractiveness of the national financial market for Italian and foreign investors alike.
The presence of a large number of foreign intermediaries in Italy is highly positive considering the
benefits they bring for Italian saving and their role in modernising the market. Accordingly, we have
taken a favourable view of the entry of foreign intermediaries and the additional intensification of
competition within Italy. However, in the absence of profitable domestic investment opportunities,
the export of saving is also facilitated. The relative weakness from which the Italian banking system
still suffers in terms of size and range of business is a handicap.
In the context of the single currency the abundance of saving, which for many decades was one of
the great strengths of the Italian economy, loses part of its value as a comparative advantage in
fostering growth.
The new situation created by greater openness to cross-border financial flows calls in the first place
for a strengthening of the efficiency and competitiveness of the banking system.
The response must be prompt and adequate in order to grasp the opportunities for growth and to
finance profitable projects in Italy. We have encouraged the privatisation of the banking system and
the formation of groups large enough to compete more effectively in Europe.
The competition for saving at the global level depends ultimately on growth and efficiency of the
economy.
Foreign direct investment in Italy amounted to respectively 5.5 and 6.3 trillion lire in 1996 and 1997;
in 1998 it rose to 6.9 trillion lire. Direct outward investment by Italian firms was 10 trillion lire in
1996 and rose to 18 trillion lire in 1997. In 1998 it amounted to 30 trillion lire. The Italian economy
attracts considerably less foreign direct investment than France, Spain or the United Kingdom. Only
Germany is more or less on a par with Italy in this respect.
In a developed economy, exports of capital by firms investing abroad are normal. In Italy, however,
there are still large parts of the country where development is insufficient and unemployment very
high.
Some 10% of all the employment generated by Italian industry is created outside the country.
Together with the weakness of investment activity, the situation of Italy's external accounts I have
described and, in particular, the balance on foreign direct investment all point to the necessity of
improving the competitiveness of Italy's productive system within the global and especially the
European economy.
Competitiveness
With the complete international opening of trade and capital movements and the adoption of the
single currency, competitiveness is directly reflected in employment and growth.
In the new international and European context, the advantage of banking and financial systems and
their ability to contribute to growth are in large part the result of the efficient use of the funds they
raise.
In an open system, however, what ultimately counts is the demand for funds; this in turn depends
crucially on the conditions of employment of the factors of production, above all the profitability of
the corporate sector.
In Italy, high taxation and the high level of labour costs relative to productivity in some areas hold
back growth in investment and employment; they contribute to the expansion of the black economy,
which harms the public finances and the efficiency of the productive system, distorts competition
and has pernicious effects on the orderly life of the community.
Between 1990 and 1997 the ratio of total general government revenue to GDP rose by 6%. In 1997
the tax burden in Italy was almost 1% above the European average; it was 13 and 14.5% higher than
in the United States and Japan respectively. In 1998 the tax burden decreased by 1% as the result of
the expiry of some temporary measures and the reduction in the yield from taxes on financial income
owing to the fall in interest rates.
Public investment fell from 3.3 to 2.4% of GDP between 1990 and 1997.
In a medium-term perspective, there are reforms, many of which have been initiated, that remain to
be completed in order to curb current spending, above all on pensions and welfare, and to enhance
the effectiveness of expenditure, especially for education and healthcare.
The efficiency of public services and the stock of infrastructure are not as high in Italy as they are in
the industrial economies with which we compare ourselves.
It is estimated that 9% of the workers in manufacturing industry are in an irregular position with
respect to tax, social security and work safety rules. In the building industry the ratio rises to 34%.
Irregular employment is much more widespread in the South, where in some sectors it reaches 50%.
At the root of the grey economy are insufficient differentials in labour costs between areas and firms
with very different levels of productivity and profitability; the phenomenon also leads to the evasion
of taxes and social security contributions. Through the black economy, the market tends to achieve a
de facto closer alignment between labour costs and productivity.
The improvement of competitiveness is to be pursued by increasing the efficiency of the public
sector. It is important to proceed with the full operational implementation of the legislative reforms
enacted.
Frequently, the limited project development capability of local authorities and the lack of
coordination with central government are far from secondary causes of the slowdown in expenditure
on public investment and the failure to use the funds and resources available.
Outlook
At the root of the instability and recurrent crises of the world economy is the very rapid, at times
chaotic, growth of finance, inconsistent with the growth in productive activity. This has
consequences for the stability of exchange rates, the purchasing power of currencies, interest rates
and securities prices. It has adverse effects on the financial position of banks and intermediaries, the
business cycle and employment.
The development of the international monetary system and its current configuration are the product
of market forces. The institutional context does not permit quantitative limits to be set on the growth
of flows. Transparent and widely accepted prudential rules for the management of intermediaries are
not always applied.
The liberalisation of capital movements and finance has greatly contributed to the growth of
worldwide investment and saving.
The gains from the liberalisation of trade in goods and services are certain at the global level and not
distributed too unevenly, thanks to the operation of relative prices in response to the availability of
factors. With the expansion of purely fiduciary money, there are no binding limits to quantities;
monetary and financial expansion can be very uneven across the world and create tension and
instability.
Monetary and financial instability is detrimental to the efficient allocation of saving and the regular
growth of economic activity. It gives rise to inflation, sometimes to recession. It can lead to an
excessive concentration of financial resources in some countries and areas and an inequitable
distribution of wealth, possibly producing tension and political conflict.
The experience of the decades since the collapse of the gold exchange standard has no precedent in
history. The free circulation of capital under the gold standard took place in a context in which the
growth of money and finance had an ultimate reference, a quantitative anchor in the gold reserves of
governments and central banks.
The Bretton Woods system, based on the reserve currency role of the dollar, considerably increased
the scope for monetary expansion and multiplication. An ultimate quantitative limit still existed.
Flows of bank capital were subject to rigid rules; the International Monetary Fund adopted forms of
control designed to ensure compliance with equilibrium conditions by each national monetary
system.
The absence from 1971 onwards of the link between gold and the international reserve currency and
the elimination, partly in response to the ideology of liberalisation and the interests of multinational
firms and banks, of every rule concerning the transnational expansion of credit and the transnational
circulation of money meant that the growth of money and credit became theoretically unlimited.
Initially, during the 1970s, this resulted in a long period of rapid inflation worldwide and high
interest rates and, ultimately, in a severe slowdown in the industrial economies.
The return to tighter monetary control in the 1980s, first in the leading industrial economy and then
in the others, led to a gradual reduction in inflation, but at the cost of a further rise in interest rates
and a prolonged drag on economic growth.
International liquidity expansion continued, partly as a result of progressive liberalisation of
shortterm capital movements.
It was only in the 1990s that more vigorous and coordinated monetary control efforts by all the
industrial countries made it possible to rein in the expansion of money, at the international as well as
the national level, and curb inflation.
The growth in the supply of securities continued, however; the complete liberalisation of capital
flows encouraged the illusion of unlimited scope for financing public sector deficits and countries'
external imbalances. The market reacted to the monetary restriction by developing derivative
products, which in practice act as an additional multiplier of the liquidity created by banking
systems.
Financial globalisation is not a zero-sum game; it brings major benefits for world economic
development but it can also generate instability and substantial losses for smaller and weaker
economies.
It is necessary to proceed resolutely with the action initiated by the International Monetary Fund and
the World Bank to relieve the heavily indebted poor countries of a burden contracted years ago in
conditions of extreme need.
The conditions exist for this relief to be completed by the end of 2000, fulfilling the hope expressed
by the Roman Catholic Church, international organisations and prominent political personalities.
On several occasions we have insisted in the appropriate official fora on the need for the activity of
the International Monetary Fund to be refocused on the prevention of crises, over and above its valid
performance of crisis management, albeit in the midst of difficulties and with some failures.
Even though the external constraint is less immediately binding, in view of the greater scope for
raising finance offered by the global market, it is necessary to place renewed emphasis on the
external equilibrium of each country and each monetary system. The macroeconomic surveillance
carried out by the International Monetary Fund under the gold exchange standard must be revived in
the new institutional and market conditions.
The main causes of the crisis in Asia in 1997 and of the more recent events in Latin America were
the failure to satisfy the conditions of external equilibrium and excessively rigid exchange rates of
local currencies.
The crisis cannot be overcome without a recovery in the growth of the world economy supported by
the domestic demand of the developed countries, as called for by the G7 at its meeting last October.
In that forum a start was also made on studies and actions aimed at reforming the working of the
international monetary system.
The creation of a European currency common to 11 countries is a major event for the stability of
world finance.
The ground was prepared for the single European currency by the stabilisation carried out by the
participating countries in the 1990s. Inflation was tamed but the rigidities and competitive
weaknesses of Europe's economies also emerged clearly.
The monetary stability that has been regained can and must provide the basis for a new phase of
growth; appropriate economic policies and consistent behaviour by employers and workers can
produce new confidence in the ability of Europe's economies to achieve rapid and sustainable
growth.
Structural policies are required in all the countries of the area to reduce the rigidity of public
expenditure on current account, allow an easing of the tax burden and introduce elements of
flexibility in a labour market that still responds to the logic of closed economies.
The measures are needed in order to bring down the high rate of unemployment and to give, through
the vigour of the productive economy, greater force to the single European currency.
Money is largely the product of credit granted to private productive activity. Its strength depends not
only on the prudent management of interest rates and quantities but also on the prosperity of the
economy and the quality of lending.
Where currencies are firmly anchored to productive activity, the setting of objectives for exchange
rates appears logically extraneous to the system.
The halt in the growth of the emerging economies and financial instability have led to a worldwide
slowdown in economic activity that is tending to carry over into 1999.
In Italy, the structural problems of the public finances, the large public debt and the level of the
competitiveness of the financial system and the economy influence investment and employment.
The adjustment of the public finances, intensified from 1993 onwards, the cooperation between
employers and the unions, and the restrictive stance of monetary policy from 1995 to 1997 made it
possible to recoup the serious fall in the value of the lira and to root out both expectations of
inflation and inflation.
Italy's re-entry into the ERM and the restrictive fiscal policy of th