84th BIS Annual Report, 2013/2014

29 June 2014

A new policy compass is needed to help the global economy step out of the shadow of the Great Financial Crisis. This will involve adjustments to the current policy mix and to policy frameworks with the aim of restoring sustainable and balanced economic growth.

The global economy has shown encouraging signs over the past year but it has not shaken off its post-crisis malaise (Chapter III). Despite an aggressive and broad-based search for yield, with volatility and credit spreads sinking towards historical lows (Chapter II), and unusually accommodative monetary conditions (Chapter V), investment remains weak. Debt, both private and public, continues to rise while productivity growth has extended further its long-term downward trend (Chapters III and IV). There is even talk of secular stagnation. Some banks have rebuilt capital and adjusted their business models, while others have more work to do (Chapter VI).

To return to sustainable and balanced growth, policies need to go beyond their traditional focus on the business cycle and take a longer-term perspective - one in which the financial cycle takes centre stage (Chapter I). They need to address head-on the structural deficiencies and resource misallocations masked by strong financial booms and revealed only in the subsequent busts. The only source of lasting prosperity is a stronger supply side. It is essential to move away from debt as the main engine of growth.

Economic chapters: Overview  |  Full version (PDF, 127 pages)

84th Annual Report by chapter

Table of contents, letter of transmittal
I. In search of a new compass
The global economy has shown encouraging signs over the past year. But its malaise persists, as the legacy of the Great Financial Crisis and the forces that led up to it remain unresolved. More...
II. Global financial markets under the spell of monetary policy
Financial markets have been acutely sensitive to monetary policy, both actual and anticipated. Throughout the year, accommodative monetary conditions kept volatility low and fostered a search for yield. More...
III. Growth and inflation: drivers and prospects
World economic growth has picked up, with advanced economies providing most of the uplift, while global inflation has remained subdued. Despite the current upswing, growth in advanced economies remains below pre-crisis averages. More...
IV. Debt and the financial cycle: domestic and global
Financial cycles encapsulate the self-reinforcing interactions between perceptions of value and risk, risk-taking and financing constraints, which translate into financial booms and busts. Financial cycles tend to last longer than traditional business cycles. More...
V. Monetary policy struggles to normalise
Monetary policy has remained very accommodative while facing a number of tough challenges. First, in the major advanced economies, central banks struggled with an unusually sluggish recovery and signs of diminished monetary policy effectiveness. More...
VI. The financial system at a crossroads
The financial sector has gained some strength since the crisis. Banks have rebuilt capital (mainly through retained earnings) and many have shifted their business models towards traditional banking. More...
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