, the data seem to point to a loss of dynamism in the canadian economy. this decline in dynamism is especially striking because it is broad - based. it can be seen in almost all industries and across the country, showing up, for example, in rates of entrepreneurship ( chart 2 ). this trend has also appeared in most oecd countries. chart 1 : aggregate entry and exit rates of new firms have been declining aggregate entry and exit rates, annual data % entry rate exit rate sources : bank of canada calculations using data from statistics canada's longitudinal employment analysis program. for the year 2016, quarterly firm creation data were used. last observation : 2016 chart 2 : chart 2 : rates of entrepreneurship have declined in all regions rates of entrepreneurship by region, annual data % 0. 6 0. 5 0. 4 0. 3 0. 2 0. 1 0. 0 canada quebec ontario atlantic region source : bank of canada calculations using data from statistics canada's labour force survey prairie region british columbia last observation : 2014 the main concern about a loss of dynamism is that it will lead to less innovation and diminishing long - term growth. the estimated potential growth rate of the economy is about 1. 5 per cent, adjusted for inflation. compared with previous - 4decades, when potential output sometimes rose to more than 3 per cent per year, this is a significant drop. 5 and this is the context in which the loss of dynamism must be considered. back to the source to better understand the possible effects of a loss of dynamism, we need to understand its causes — a more difficult task than it sounds. some leads are more promising than others. the fact that we see this loss of dynamism not only in canada but also in most oecd countries suggests that its causes are not unique to canada and that there may be common factors. 6 a first factor to consider is population aging. the younger you are, the more likely you are to become an entrepreneur and start your own company. 7 the appetite for risk is perhaps more intense when you have less to lose and the expected benefits are spread out over a greater number of years. however, our data show that the rate of entrepreneurship has dropped for all age groups. indeed, we even see that the decrease in entrepreneurship is greater among people aged 25 to 44. 8 so population aging can explain only part of the decline in entrepreneurial activity. on the other hand, this

; a record - high employment - to - population ratio ; corporate profits at their highest level since early 2001 ; and, as i said a few moments ago, above - target trend inflation. while we continue to foresee growth somewhat below potential in the first half of this year, we expect increased demand in the second half of 2003 and into 2004, as global uncertainties diminish. but with an appropriate reduction in the amount of monetary stimulus, we see the level of output remaining close to capacity during this year and into 2004. so, in making our interest rate decision on 4 march, we weighed the following considerations : domestic inflation pressures, the expectation that canadian economic activity will remain near potential in 2003 despite geopolitical uncertainties, the stimulative stance of monetary policy, and improved conditions in capital markets. taking all of these factors into account, the bank raised its key policy rate by one - quarter of a percentage point to 3 per cent. even with this increase, the stance of monetary policy remains stimulative. thus, over time, further reductions in monetary stimulus will be required to return inflation to the target over the medium term. but, as we have said, the timing and pace of increases in policy interest rates will continue to depend on a number of considerations. these include the strength of demand pressures ; the evolution of inflation expectations ; the impact on confidence of geopolitical and global economic uncertainties ; and the way in which developments in the middle east affect demand and inflation, both globally and in canada. the bank will continue to closely monitor all of these factors. * * * * * * * * * * * * * * * * * * * * * * * let me conclude. at the beginning of my talk today, i noted that, for over a decade now, canada has followed a policy based on the four key principles : trade liberalization, structural reform, fiscal prudence, and inflation control. it's never easy to follow those principles, but, over the medium term, they do lead to better economic performance. canada's recent economic record is evidence of that. we have maintained an enviable growth performance through what has been a very difficult period for the world economy. we remain optimistic - and so do others - that we will continue to do so. both the oecd and the imf predict that canada's economy will outperform those of other g - 7 countries this year. but these are