Bond yields and exchange rates have posted relatively large movements over the past year and a half. During 1994. long-term interest rates rose between 175 and 500 basis points across the industrial countries. They then tumbled in 1995. largely reversing the 1994 run-up in many cases. Although such swings are not unusual by the standards of the 1970s and 1980s. They were nevertheless surprisingly large in view of the high degree of price stability that has been reestablished in most countries (Chart 15). There have also been wide shifts in exchange rates. By mid-1995, for example, the effective exchange rate of the yen had appreciated by almost 25 percent from its already high level at the end of 1993. Then between mid-1995 and early fall, the yen depreciated sharply, roughly reverting to its late 1993 value. Movements in other currencies have been less dramatic but have nevertheless contributed to widespread concerns that exchange rate movements may have been restraining growth in countries with strong currencies, while adding to inflationary pressures in countries with depreciated currencies.
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