this is known in academic circles as the quality bias. it is not easy to distinguish between the price rises and quality improvements of sophisticated products such as computers and telecommunications equipment. for marketing reasons, technological innovations may be very highly priced, for one thing because the development costs need to be recovered. later generations of it tools, by then mass - produced, are invariably much cheaper than their predecessors. falling prices and an impressive expansion of investment and profitability then go hand in hand, which is a fairly unusual phenomenon macroeconomically. the variety of products and their ever - shorter life cycle add to the risk that distortions in price indices increase over time. the second cause of statistical distortions in inflation is the growing importance of services ; this is known as the services bias. in 1997, more than 65 % of the nominal value added within the dutch economy was accounted for by the services sector. in 1950, it had still been less than 50 %. the shares of the agricultural sector and manufacturing industry have shrunk accordingly. within the services sector, the greatest expansions are accounted for by business services, banking and telecommunications. the problem is that it is not easy to determine the output volume of services, which can usually only be calculated in a roundabout way. because the growth of output is underestimated, price movements in the services sector are systematically overestimated because of these measurement problems. this ( unduly ) low estimation of output growth is corroborated by studies made by the netherlands bureau for economic policy analysis. according to them, the total productivity of business services in the netherlands between 1991 and 1995 came out at minus 1. 5 %. compared to the increase in productivity in manufacturing industry in the same period, of 1. 75 %, this figure is implausibly low. the problems inherent in measuring the cpi are compounded further by the fact that services have come to make up an increasingly large share of the national product. the third factor causing measurement problems with regard to inflation may be termed the substitution bias. in practice, the composition of the package of goods and services purchased by consumers changes fairly rapidly. that is especially true in this day and age, with new and improved products being marketed all the time. the package composition underlying the cpi is adjusted for such changes only once every five years. the basket of goods and services used to calculate the cpi has recently been harmonised within the european union. this harmonised cpi will be used by the escb as a measure

flight - to - liquidity flows observed at the onset of the covid - 19 crisis. specifically, against the backdrop of an improved economic outlook, investors increasingly switch from fixed income into more risky asset classes. • the second and third observation are that both us macro news ( the dark blue component ) and us policy ( the light blue component ) are driving factors behind the recent rise in yields. more specifically, these two factors turn positive in early january when the democrats gained control over the senate by the surprise win in georgia. as of that moment, the expectations surrounding the size of a potential fiscal package have significantly grown, which resulted via both the us macro and us policy component in upward pressure on euro area yields. chart 2 : decomposition daily changes in the 10 - year euro area ois rate 0, 3 ea policy us macro ea macro global risk us policy ea 10y ois 0, 2 0, 1 - 0, 1 dec - 20 jan - 21 feb - 21 mar - 21 source : dnb staff calculations. note : decomposition based on a two - country bvar. shock identification based on sign and magnitude restrictions. daily data. last observation 23 - 03 - 2021. • another channel via which an improved global economic outlook affects the euro area are oil prices and ultimately via expected inflation. charts 3 and 4 illustrate this by highlighting that the rise in oil prices was largely driven by demand side factors. the dominance of demand - side factors behind the rise of oil prices confirms that the improving economic outlook is an important driver. driven by the rising oil prices and the improving outlook, market - based measures of inflation expectations have surged as well, as depicted in chart 4. international spillovers and the ecb ’ s monetary policy — 3 chart 3 : decomposition daily changes in oil chart 4 : euro area ils and oil prices price supply demand 5y5y eur inflation swap rate oil price ( $, brent, rhs ) 1, 7 1, 5 1, 3 - 10 - 20 1, 1 - 30 - 40 0, 9 - 50 - 60 dec - 19 0, 7 mar - 20 jun - 20 sep - 20 dec - 20'19'20'21 source : dnb staff calculations. note : decomposition of the oil price into demand and supply factors based on a var model. identification based on sign restrictions. daily data. last observation : 23 - 032021. 4. the ecb ’ s policy response • not every rise in yields is inconsistent