such as the domestic output gap and inflation expectations ). today, inflation is becoming increasingly less local, and in turn, becomes more and more dependent on global factors, i. e. the relationship between global demand to global supply. research that analysed the course of inflation in 22 oecd countries between 1960 and 2003 has shown that 70 % of inflation volatility may be explained by a common factor 7. this global, common factor explains not only the change in the inflation trend ( the increasing inflation between 1960 and 1980 and its subsequent decrease ), but also inflation fluctuation over a business cycle. the research has also shown that, where domestic inflation deviates from the “ global ” inflation, it exhibits a “ global - inflation - reverting ” tendency. as a consequence, modelling and forecasting of domestic inflation may be improved significantly by taking into account the “ global inflation ”. the fast - progressing globalisation is closely related to offshoring and outsourcing, whose scope is also growing. unfortunately there is not much hard data that would allow for assessment of the scale of the phenomenon. offshoring analysis is available only for selected countries and covers only selected industries. however, the growing scale of the phenomenon is reflected by data on global trade in goods and services and on foreign direct investment. over the past 15 years, the shares of individual regions in the global trade have changed significantly, whereby the decreasing share of the eu is accompanied by increasing shares of the developing countries, including the asian countries. globally, foreign trade expressed as percentage of the gdp increased from the average 19 % of the gdp between 1980 and 1989 up to 25 % between 2000 and 2004. table 1. shares of individual regions in global trade % total developed countries us ue15 developing countries asia source : imf direction of trade statistics bis 75 annual report, 2005. th ciccarelli, mojon “ global inflation ”, central bank of chile working papers no 357, december 2005. global capital flows keep growing even more dynamically, whereby the share of the global fdi in the global gdp increased from 8 % in 1989 to 22. 1 % in 2003, and foreign assets expressed as percentage of the gdp increased from 62. 6 % of the gdp to 186. 1 % of the gdp, respectively. as evidenced, the role of trade and financial links between enterprises in various countries has become more important over recent years. previously, in response to growing fuel prices or costs of living, trade

domestic stakeholders including the department of finance, the national treasury management agency and the relevant regulated firms. thankfully, this immediate cliff edge risk has been largely mitigated with the european commission ’ s decision to grant temporary equivalence to the uk ’ s legal and supervisory arrangements for csds until 29 march 2021. the central bank will continue to liaise with the relevant stakeholders to ensure a long - term solution is implemented on time. the csd issue outlined above is not the only area where financial regulatory authorities have had to take steps to mitigate against cliff edge risks. work from the prudential regulation and financial conduct pillars in the central bank has highlighted some remaining risks of consumer detriment and corresponding mitigating measures. for example, the central bank has worked with the department of finance to support the drafting of legislation to protect customers of insurance products in the event of a no - deal scenario. 5 the recently published brexit omnibus bill includes amendments to allow for a temporary run - off regime, which will allow certain uk / gibraltar insurers and brokers to continue to service existing insurance contracts with irish policyholders. this is necessary to protect consumers in the event of a hard exit. 6 authorities have also taken steps with respect to investment funds. some issues that have arisen include the loss of passporting for uk fund management companies acting for irish funds and the loss of the ability for irish funds to delegate their portfolio management to uk investment managers. as with the other issues we have faced, the central bank has engaged intensively with other relevant stakeholders to mitigate these problems and cooperation with our european partners has been essential. esma recently agreed memoranda of understanding with the financial conduct authority ( fca ) of the uk which allows activities, such as fund manager outsourcing and delegation, to continue to be carried out by uk based entities on behalf of counterparties based in the european economic area ( eea ). 7 cooperation with uk authorities has also been important with the fca implementing a temporary permissions regime that allows eea - based firms currently passporting into the uk to continue regulated business within the scope of their current permissions in the uk in the event of a no deal brexit. 8 3 / 8 bis central bankers'speeches the irish economy and the uk leaving the eu moving to macroeconomic aspects of the uk ’ s departure from the eu, much has been said regarding the particular vulnerability of the irish economy and i think it is true that ireland will be