likely to become larger, more frequent and possibly more persistent amid rising political uncertainty, geoeconomic fragmentation, a possible tariff war and climate change. these driving factors reinforce each other and have non - linear effects on inflation and output. central bankers need to timely assess whether such supply - side price shocks are transitory or more permanent entailing a risk of de - anchoring inflation expectations. to this end, we need to collect more granular data and develop further our analytical tools to deepen our understanding of both the characteristics of the price shock and the complexities of the environment in which it occurs. the recent high - inflation episode is a good example. first, it has shown that commodities that are critical for production and more upstream along the supply chain are likely to create larger shifts in relative sectoral prices and spill over to core inflation. second, a combination of different types of supply and demand shocks amid structural transformations of the economies can blur the assessment of the impact of a commodity price shock on inflation and output, complicating monetary policy. one lesson from the recent experience of the post - pandemic surge of inflation is that existing models failed to predict it. central banks need to develop new tools which are able to identify the nature of the shock ( supply vs demand ) in real time and assess its implications for inflation. to this end, the bank of greece is developing forecasting models of inflation based on textual indicators of supply and demand disturbances in commodity markets from news articles of reuters and dow jones. 3 with the help of ai, these indicators can be updated on a daily basis and help predict inflation more accurately. preliminary findings of this research project, suggest that these indicators provide distinct information about future inflation movements relative to existing predictors, inflation expectations and survey forecasts. overall, they reduce out - of - sample inflation forecast errors by up to 30 percent. for energy - importing economies, like greece, the nature of energy price shocks, either supply - or demand - driven, is less relevant when assessing their overall economic impact. in particular, research shows that in european economies both types of global energy price shocks tend to influence wages similarly, with largely short - lived and transitory effects. 4 the most pivotal factors in driving inflation sharply upward during the recent inflation episode were the size and persistence of the energy price shock rather than its nature. the large and sustained shock necessitated a forceful monetary policy tightening cycle to curb inflation. domestic structural factors largely shape the transmission of commodity price changes to

and increasingly outward - looking economy. as at the end of 2003, there were sixteen banks licensed to operate in or from malta. of these, eight were deposit money banks catering largely for the domestic market and licensed to transact in both the domestic and in foreign currencies. the other eight were international banks licensed to carry on banking business almost exclusively with non - residents and in foreign currency only. it should be noted that the distinction between domestic and international banks is administrative rather than legal, and is based simply on each institution ’ s choice as to whether or not to apply for a licence to operate domestically or to deal only with non - residents. otherwise all banking institutions are subject to the same regulatory and supervisory regime. with the coming into force of the single european passport for credit institutions, moreover, even this administrative distinction will become largely irrelevant. nevertheless, the international banks are without exception wholesale banks, while at least half of the domestic banks are retail banks, of which two have an extensive branch network. the impact of the international banks on employment and national income is still modest, although it is growing steadily. but they contribute substantially to the transfer of financial and technological know - how and to increased competition, as well as to the international integration of the maltese financial system. last year, for instance, one of these banks, which specialises in trade finance, acquired a controlling share in the london forfaiting company plc, and more recently concluded a deal for factoring in india. as for the domestic banking sector, which at the end of 2003 accounted for over 60 % of the lending portfolio and 80 % of the deposit liabilities of the entire banking system, this remains highly concentrated, reflecting the small size of the market and the history of the industry. in fact, until recently, the two largest banks accounted for over 90 % of the sector ’ s assets, though this share is now closer to 75 % as another two banks have since been licensed to operate domestically. today maltese banks are almost entirely in private hands, and at least five of the domestic banks, including one of the major ones, are foreign owned, while another, smaller bank is partly foreign owned. the government still retains a 25 % stake in bank of valletta, one of the two larger domestic banks, but it has stated its intention to divest itself of this holding and is currently looking for a strategic partner. as the economy developed and confidence in the banks increased, bank intermediation in malta, which was rather