of mind for many of you, given the strength of business activity here in british columbia. it is also top of mind for the bank of canada. obtaining an up - to - date and better understanding of the investment intentions of the business community is critical for our outlooks for economic activity and inflation, which inform our monetary policy decisions. although business investment represents a relatively small share of gdp — about 12 per cent, on average — it is a key economic indicator that we track closely for three main reasons. first, it reflects your expectations about the future. therefore, it is an economic bellwether — you will invest only when you are relatively certain that the demand for your goods and services will remain firm or increase. second, fluctuations in business investment can drive the business 1 / 9 bis central bankers'speeches cycle — roughly 50 per cent of the movements in quarterly gdp during the great recession and its aftermath were due to shifts in business investment. and third, investment adds to our stock of capital and increases the level of “ potential output ” or productive capacity — the level of output our economy can produce sustainably without generating inflationary or disinflationary pressures. my talk consists of three main sections. i ’ ll start with an overview of the cyclical and structural forces affecting investment. then i ’ ll review the impacts of these forces on investment in canada since the 2008 – 09 recession, especially the period since mid - 2014. finally, i ’ ll discuss our basecase or most likely outlook for investment and the economy and our assessment of the risks to inflation. investment : cyclical and structural forces cyclical forces as i mentioned, business investment is a small and relatively volatile component of gdp, and investment across business sectors tends to crest and trough like the tides in response to shocks to demand. this ebb and flow reflects two related factors. first, investment projects are often large, require irreversible sunk costs, and take time to build and operate. undertaking them depends on expectations of future demand. second, the expectations of individual firms are often influenced by the behaviour of other firms and perceptions of overall business confidence. consequently, common movements in expectations can become self - fulfilling. if many firms invest together, they will collectively boost demand for their products. the famous british economist john maynard keynes called these shared psychological forces “ animal spirits, ” which he described as the “ spontaneous urge to action rather than inaction. ” 1 when these spirits are aroused and businesses start to see demand strengthening

indeed, stable money, low and predictable inflation, and fiscal responsibility are probably the most essential public goods governments and central banks can provide over a short term to support innovation. it is equally well known that market - based access to finance enables to quickly mobilise necessary funds for innovation. single financial market supported by common infrastructure plays an essential role in increasing the competitiveness of the european union. ladies and gentlemen, let me once more welcome you to tallinn. i wish you a successful and thought provoking conference.