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52Nd Annual Report of the Bank for International Settlements

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52Nd Annual Report of the Bank for International Settlements BANK FOR INTERNATIONAL SETTLEMENTS FIFTY-SECOND ANNUAL REPORT 1st APRIL 1981 - 31st MARCH 1982 BASLE 14th June 1982 TABLE OF CONTENTS Page Introduction 1 I. The Narrow Path of Policy 3 II. Recession, Recovery and Growth: Problems and Policies . 9 Highlights (p. 9); demand and output: short-term developments (p. 10); public-sector problems (p. 13); the US budget (p. 14); the problem of chronic budget deficits (p. 18); the size of the public sector (p. 22); the energy situation (p. 25); fixed investment and slow growth (p. 27); investment and saving (p. 27); the implications of slow growth (p. 32). III. Inflation and Unemployment 35 Highlights (p. 35); recent price developments (p. 36); commodity price shocks, exchange rates and domestic prices (p. 39); wages, productivity and unemployment (p. 43); the inflation/unemployment trade-off (p. 47); employment and labour-force growth (p. 49); labour-market rigidities (p. 51); eradicating inflation: does the end justify the costs? (p. 53); some policy considerations (p. 56). IV. Monetary Policy and the Financial Markets 59 Highlights (p. 59); salient features of recent interest rate developments (p. 60): nominal interest rates (p. 60), the variability of interest rates (p. 63), real interest rates (p. 63), term structure of interest rates (p. 64), interest rates and exchange rates (p. 65); forces underlying interest rate behaviour (p. 66): the stance of monetary policy (p. 67), real money stock (p. 69), income velocity (p. 69), bank credit (p. 71); private-sector financial positions and credit markets (p. 72); government borrowing requirements and the financial markets (p. 73); deregulation and financial innovation (p. 76); inflationary expectations, risk premia and other factors (p. 77); structural implications of high and variable interest rates (p. 78); the objectives and techniques of monetary policy (p. 80): monetary objectives and monetary developments (p. 80), monetary control in the short run (p. 82), defining money: a growing problem (p. 84), financial innovation (p. 86); monetary targeting: the rôle of operational flexibility (p. 87). V. International Balances of Payments 91 Highlights (p. 91); the global pattern of balances of payments (p. 92): current-account developments (p. 92), financing of global balance-of-payments disequilibrio, (p. 97); balance-of-payments developments in the Group of Ten countries and Switzerland (p. 99): adjustments in current payments positions (p. 99), capital flows and the financing of external imbalances (p. 107). Page VI. The International Credit and Capital Markets 114 Highlights (p. 114); the international lending aggregates in 1981 (p. 115); main influences (p. 117); sources and uses of international banking funds (p. 121); use of the international banking sector by non-bank residents of Group of Ten countries (p. 125); currency structure of international bank activity (p. 128); developments in individual market centres (p. 129); the international bond markets (p. 132). VII. The International Monetary Scene 141 Highlights (p. 141); exchange rate developments (p. 142); daily variability of spot dollar exchange rates (p. 153); changes in real exchange rates and international competitive positions (p. 154); gold production and the gold market (p. 158); reserves and international liquidity (p. 161). VIII. Activities of the Bank 169 Development of co-operation between central banks and international organisations (p. 169); operations of the Bank (p. 171): liabilities (composition of resources) (p. 173), assets (employment of resources) (p. 175), forward gold operations (p. 177); net profits and their distribution (p. 178); the Bank as Depositary under the terms of the Act of Pledge concluded with the European Coal and Steel Community, and as Trustee for international government loans (p. 179); the Bank as Agent for the European Monetary Co-operation Fund (p. 179); changes in the Board of Directors and in the Management (p. 182). Conclusion 184 Balance Sheet and Profit and Loss Account at 31st March 1982. LIST OF TABLES AND GRAPHS (Graphs are indicated by an asterisk) Page Recession, Recovery and Growth: Problems and Policies Larger industrial countries: Changes in real gross national product and its components 11 Industrial production* 12 The US Federal budget deficit and gross private saving 14 The US Federal credit budget 16 General-government financial deficits as a percentage of gross private saving, 1966-81 19 General-government expenditure in relation to GNP* 23 Growth performance and the share of public spending in GNP* 24 Energy and oil use in the OECD countries 25 Real non-residential business investment 28 Gross domestic fixed investment 29 Labour's share in total domestic factor income 30 Gross domestic saving ratios 32 Inflation and Unemployment Inflation in the Group of Ten countries and Switzerland* 37 Consumer price inflation* 38 Changes in consumer prices 39 World-market commodity prices: Oil and non-oil* 40 Traded goods prices, domestic prices and effective exchange rates* . 42 Changes in nominal wages 44 Unit labour costs* 45 Wages and productivity in manufacturing industry, 1974-76 and 1979-81 .... 46 Unemployment 46 Inflation and unemployment, 1960-82* 48 Labour force and employment 50 Monetary Policy and the Financial Markets Short and long-term interest rates* 61 Month-to-month variability of interest rates 62 Day-to-day variability of short-term interest rates 63 Real short and long-term interest rates* 64 The money stock, interest rates and exchange rates* 65 Rates of monetary expansion 67 The real money stock and real GNP* 68 Changes in the income velocity of the broad and narrow money stock* 70 Monetary system — credit to enterprises and individuals and total domestic credit 71 Public-authority borrowing and indebtedness 74 Page Net financial saving 75 Monetary and credit aggregates: Objectives and rates of expansion 81 Variability of changes in the monetary aggregates 82 Variability of changes in measures of M, in the United States 83 Contribution of selected components to the growth of the broad money stock . 85 International Balances of Payments International current-account balances, 1979-81 93 Changes in the components of the OPEC countries' current-account balance, 1980-81 94 Estimated changes in components of the aggregate trade balance of the Group of Ten countries and Switzerland, 1979-81 ' 95 Estimated deployment of the OPEC countries' investible surplus, 1980-81 ... 98 Estimated components of changes in non-oil trade balances in the Group of Ten countries and Switzerland, 1980-81 101 Group of Ten countries and Switzerland: Capital flows and the financing of external imbalances, 1980-81 108 The International Credit and Capital Markets Estimated lending in international markets: Changes in external claims of banks and international bond issues 116 US prime rate, interbank rates on three-month Euro-currency deposits and differentials over domestic rates* 118 Geographical pattern of international banking flows 122 The international banking sector as a deposit outlet and source of credit for non-banks in Group of Ten countries and Switzerland 126 Currency composition of Euro-currency flows 128 Changes in external positions of banks in individual reporting countries and of certain offshore branches of US banks 130 International bond issues 133 Euro-currency deposit rates and yields on international markets for US dollar and DM bonds* 135 Geographical distribution of external positions of banks in the reporting area and of certain offshore branches of US banks 137 Currency breakdown of foreign currency positions of banks in reporting European countries 138 External assets and liabilities of banks in individual reporting countries and of certain offshore branches of US banks 139-140 The International Monetary Scene Selected industrial countries: Movements of bilateral exchange rates against the US dollar, 1980-82* 143 Selected industrial countries: Movements in effective exchange rates, 1980-82* . 144 Germany and the United States: Development of the spot exchange rate and of interest rate differentials, 1980-82* 146 Changes in nominal exchange rates, January 1981-April 1982 147 Spot exchange rates in the EMS exchange rate mechanism, 1981-82* 149 Page The development of nominal and real exchange rates of other EMS currencies vis- à-vis the Deutsche Mark and of inflation differentials between other EMS participants and Germany, 1976-82* 151 Daily variability of selected spot dollar exchange rates, 1973-82* 153 Selected industrial countries: Movements of real effective exchange rates in terms of relative industrial wholesale prices, 1973-82* 155 Selected industrial countries : Movements of real effective exchange rates in terms of relative unit labour costs, 1973-82* 156 Estimated world gold production 159 Estimated market sources and uses of gold 160 Market prices of gold in US dollars and Swiss francs, 1980-82* 161 Changes in global reserves, 1979-81 162 The pattern of investment of exchange reserves, 1977-81 166 Activities of the Bank Development of the balance-sheet total over the past three financial years .... 172 Development of the composition of resources over the past three financial years . 173 Borrowed funds, by origin 174 Borrowed funds, by nature and term to maturity 175 Distribution, by nature, of sight assets and other investments 176 Time deposits and advances and securities at term, by term to maturity 177 Secured loans of the European Coal and Steel Community 179 FIFTY-SECOND ANNUAL REPORT submitted
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