84th Annual Report
1 April 2013–31 March 2014
Basel, 29 June 2014
 
This publication is available on the BIS website (www.bis.org/publ/arpdf/ar2014e.htm).Also published in French, German, Italian and Spanish.
© Bank for International Settlements 2014. All rights reserved. Limited extracts may be reproduced or translated provided the source is stated.
ISSN 1021-2477 (print) ISSN 1682-7708 (online)ISBN 978-92-9131-532-1 (print) ISBN 978-92-9131-533-8 (online)
 
Contents
Letter of transmittal
 ..................................................... 1
Overview of the economic chapters
 .................................. 3
I. In search of a new compass
 ......................................... 7The global economy: where do we stand? ....................................... 8The global economy through the financial cycle lens ............................. 10A balance sheet recession and its aftermath ................................. 10Current macroeconomic and financial risks .................................. 12Policy challenges .............................................................. 14Near-term challenges: what is to be done now? ............................. 14Longer-term challenges: adjusting policy frameworks ......................... 17Conclusion ................................................................... 20
II.
Global financial markets under the spell of monetary policy
 ... 23The year in review: a bumpy ride in the search for yield .......................... 23Emerging market economies suffered sharp reversals ............................. 27Box II.A: Determinants of recent currency depreciations in EMEs ................... 29Central banks left their mark on financial markets ................................ 30Financial markets fixated on monetary policy ................................ 31Box II.B: The 2013 sell-off in US Treasuries from a historical perspective ............. 32Low funding costs and volatility encouraged the search for yield .............. 34
III. Growth and inflation: drivers and prospects
 ..................... 41Growth: recent developments and medium-term trends ........................... 42A stronger but still uneven global recovery ................................. 42The long shadow of the financial crisis ...................................... 44Box III.A: Recovery from a balance sheet recession ............................... 45Box III.B: Measuring output losses after a balance sheet recession .................. 48Inflation: domestic and global drivers ........................................... 49Better-anchored inflation expectations? ..................................... 51Box III.C: Measuring potential output and economic slack ......................... 52A bigger role for global factors? ........................................... 53Investment and productivity: a long-term perspective ............................. 56Declining productivity growth trends ....................................... 58
IV. Debt and the financial cycle: domestic and global
 ............. 65The financial cycle: a short introduction ......................................... 65Box IV.A: Measuring financial cycles ............................................. 68Where are countries in the financial cycle? ...................................... 69
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BIS 84th Annual Report