to address this risk? some policy makers have argued that public disclosure of information could help reduce the risk of future systemic financial crisis, by preventing the buildup of " excessive " leverage or concentrations of risk. the principal focus of attention, as in the immediate wake of the failure of long term capital management, has been on two quite different types of public disclosure. the first is information that would make it easier to evaluate the overall leverage or risk profile of major hedge funds and their counterparties, and thereby judge their vulnerability to a sharp movement in asset prices. the second is information about the actual positions of individual funds or institutions : information that would make it easier to identify concentrated exposures to specific risk factors, and thereby assess more accurately the potential impact of the failure of a major fund or institutions on the market as a whole. these pose very different challenges and offer different benefits. there are a number of crude measures of overall risk profile that, if disclosed to the market, would give counterparties information they do not now typically get about the risk of failure of the fund. one example is data on the size of daily variations in net asset value, var, or profit and loss over the previous quarter. this type of information would not reveal proprietary information about trading strategies or otherwise create substantial disincentives to risk taking. although these would provide some information on the overall risk profile of the fund, they would be lagging indicators, and they would carry the usual risk of providing false comfort in some circumstances and excessive concern in others. adopting such measures would give the institutions that provide financing and leverage to hedge funds a somewhat greater capacity to judge their direct risk to those funds. but that is not their principal challenge. the institutions already know the positions they are financing, and they can use the usual range of tools to measure the potential exposure, net of collateral, in those positions. and where they do not feel they have adequate information to evaluate the overall risk profile of the fund, they can manage that risk by taking less exposure, by requiring more margin, or by building a greater cushion of protection against overall risk. so the potential gains from a disclosure regime of this type would be limited, at least as compared with the cost of trying to put such a regime in place on the global scale that would be necessary to make it effective. by far the greater challenge is to assess the potential impact of the failure of a major hedge fund on the firm's other exposures and other counterparties. this is

david dodge : economic outlook and recent developments in canada opening statement by mr david dodge, governor of the bank of canada, to the standing senate committee on banking, trade and commerce, ottawa, 6 december 2007. * * * good morning, mr. chairman and committee members. let me start by saying how much i have appreciated our semi - annual meetings with this committee over the past seven years. the discussions that paul and i have had with you have been very valuable for the bank of canada. i hope that you have found them equally useful and that these regular appearances will continue long after i have left the bank. today's meeting comes just a couple of hours after we published the latest edition of our financial system review. but it has been quite some time since we issued our october monetary policy report. nevertheless, i want to begin with the economic outlook as we saw it in october. i will then talk about developments since that time and our current assessment of the risks to the outlook. the bank's outlook from october is summarized in tables 1 to 3 of the monetary policy report. in october, we saw strong global economic growth continuing in 2008 and 2009, although we foresaw considerably weaker u. s. growth in 2008 than had previously been the case. the global outlook is summarized in table 1. in canada, we were looking for weaker economic growth in the fourth quarter of this year and the first half of 2008, but some strengthening thereafter. as you can see from table 2, we were expecting continued strong final domestic demand throughout the projection period, but considerably weaker net exports. this outlook reflected weaker u. s. growth and a stronger canadian dollar, which was assumed to average 98 cents u. s. over the projection period. inflation was expected to peak in the fourth quarter of this year before returning to the 2 per cent target around the middle of 2008, as you can see from table 3. against this background, we left the target for the overnight rate unchanged at 4 1 / 2 per cent on 16 october, and judged the risks to our outlook to be roughly balanced with perhaps a slight tilt to the downside. now, let me turn to developments since october. the canadian economy continues to operate above its production capacity. given the strength of domestic demand and weak productivity growth, there continue to be upside risks to the bank's inflation projection. however, other developments since october suggest that the downside risks to the bank's inflation projection have increased. difficulties in global