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18 March 2015

BIS Quarterly Review, March 2015

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The review covers international banking and financial market developments: a wave of further easing, highlights of global financing flows, plus special features.

A growing share of sovereign debt and even some private bonds are now trading at negative yields as a wave of easier monetary policy feeds through into unprecedented bond market conditions.

The revival in international bank lending since early 2014 has occurred alongside persistently strong bond issuance in emerging markets. Cross-border lending to most Asian emerging economies continued to grow rapidly, although lending to China showed signs of peaking.

To view the potential costs of deflation solely through the lens of the Great Depression could be misleading, argue Claudio Borio, Magdalena Erdem, Andrew Filardo and Boris Hofmann (BIS). Their historical review finds little systematic connection between price deflation and growth.

The heavy indebtedness of oil producers may have amplified the sharp drop in oil prices and related investment, find Dietrich Domanski, Jonathan Kearns, Marco Lombardi and Hyun Song Shin (BIS).

Investment in the major advanced economies will only recover strongly once economic uncertainty recedes and firms regain confidence in their profit outlook, suggest estimates by Ryan Banerjee, Jonathan Kearns and Marco Lombardi (BIS).

Greater financial inclusion boosts growth and reduces poverty. It also affects how central banks set monetary policy, argue Aaron Mehrotra and James Yetman (BIS). The financial system may become more stable, although that depends on how inclusion is achieved.

Liquidity in core sovereign bond markets has recovered after the financial crisis but not so in corporate bond markets, argue Ingo Fender and Ulf Lewrick (BIS), drawing from a recent report by the Committee on the Global Financial System.

Press release

Full review

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