Transparency eased communication: an account of the factors behind the revision  In our Monetary Policy Report, the interest rate forecast is accompanied by a separate chart, shown here, that shows the revision since the previous report due to changes in exogenous factors. By carefully explaining the reasoning behind the revisions of our interest rate forecasts, financial market participants and other interested parties can make their own judgment as to whether the revisions seem justifiable. In general, interest rate forecasting has worked well. As market expectations tend to react to economic news largely in line with the Bank’s response pattern, there is little doubt that the contingency of the forecasts is well understood. BIS Review 113/2010  3  Interest rate forecast and exit strategy  Another advantage of publishing our own forecast for interest rates is that the exit strategy is an inherent part of the Bank’s communication. A key element of any exit strategy is that policymakers must guide expectations. An exit that takes markets by surprise can lead to major reassessments of the yield curve. Publishing explicit interest rate forecasts is a very direct way of guiding financial market participants’ expectations. Historical perspective I The decline in world trade during the crises of 1929–1933 and 2008–2010  The third lesson is the need for multilateral cooperation and collective action. As the global economic and financial crises unfolded, joint, massive and unprecedented policy responses were put in place around the world so as to avoid another Great Depression.

And yet, the G20 lacks the legitimacy that has historically been associated with a truly multilateral framework. Other countries do not participate, directly or indirectly, but are called upon to contribute to efforts that others have agreed. The vast majority of the members of the IMF have no voice or representation in these discussions, including all low-income countries and most emerging economies. All in all, multilateral cooperation and collective action functioned reasonably well during the crisis. With the world recovering from the crisis, the G20 should strive for wider acceptance and legitimacy to make sure that the basis for strong multilateral cooperation and collective action is also in place when policies for reform and prevention are implemented. Truly global challenges call for truly global solutions anchored in a multilateral and statutory-based system of representation like the Bretton Wood Institutions. All countries, large and small, rich and poor, should be represented, even if only indirectly through constituencies. General government fiscal balances As a percentage of nominal GDP, 2000–2011 Projections from OECD for 2010–2011  These are some lessons learned from the crisis. Still, several unresolved questions remain. 6  BIS Review 113/2010  The chart shows general government fiscal balances as a percentage of GDP in selected countries. Many countries had negative fiscal balances through the last decade despite moderate to high economic growth. Spain seemed to be in a different position with a positive fiscal balance, though this was mainly due to unsustainable high growth in the construction sector.