The 67th Annual Report of the Bank for International Settlements for the financial year which began on 1st April 1996 and ended on 31st March 1997 was submitted to the Annual General Meeting of the Bank held in Basel, Switzerland on 9th June 1997.
Introduction: clear objectives but unclear indicators
While plausible explanations can be suggested for many of the economic and financial developments in 1996, they were nevertheless surprising in a number of respects. Equity markets in many countries rose sharply, often in the face of stagnant levels of economic activity and continuing low levels of inflation. European bond yield differentials narrowed as US bond rates increased, in marked contrast to patterns observed in 1994 and 1995. The dollar rose in tandem with the continued strength of the US economy, in spite of persistent and growing trade deficits. In Japan and the major continental European countries, investment spending failed to strengthen as normal in the wake of rising exports. In some parts of Latin America and Africa, prospects for sustained growth took a turn for the better, while in parts of Asia imbalances became more evident. And private capital flows to emerging markets exceeded previous records by wide margins, with international bond issues playing a prominent role. Were these surprising developments the product of fundamental economic forces or, rather, will they be reversed by such forces in the future?
The views expressed here do not necessarily reflect the views of the BIS member central banks.