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In its main economic review for the year, BIS points out that although six years have passed since the eruption of the global financial crisis, robust, self-sustaining growth still eludes the global economy. During this time, central banks in advanced economies have been forced to look for ways to increase their degree of accommodation. But central banks cannot solve the structural problems that are preventing a return to strong and sustainable growth.
"Central banks cannot repair the balance sheets of households and financial institutions. Central banks cannot ensure the sustainability of fiscal finances. And, most of all, central banks cannot enact the structural economic and financial reforms needed to return economies to the real growth paths authorities and their publics both want and expect.
"What central bank accommodation has done during the recovery is to borrow time - time for balance sheet repair, time for fiscal consolidation, and time for reforms to restore productivity growth." But the time needs to be used wisely, as the balance between benefits and costs is deteriorating.
A return to growth calls for a different mix of policies: "Authorities need to hasten labour and product market reforms so that economic resources can shift more easily to high-productivity sectors. Households and firms have to complete the difficult job of repairing their balance sheets, and governments must intensify their efforts to ensure the sustainability of their finances. Regulators have to adapt the rules to a financial system that is becoming increasingly interconnected and complex and ensure that banks have sufficient capital and liquidity buffers to match the associated risks. Each country needs to tailor the reform agenda to maximise its chances of success without endangering the on-going economic recovery." With others doing their part, central banks will be able to normalise monetary policy.