integrative - trade supply chain. and, of course, if you are in a resource - extraction business, there may be few opportunities to outsource. ultimately, the integrative trade model is a powerful force for advancing living standards. we can see evidence of it in action everywhere. most of us have examples in the mobile phones we are carrying in our pockets right now. it ’ s true, of course, that the globalization of supply chains has required economic adjustments. these adjustments can be painful for individuals, and it is incumbent on policy - makers to help buffer the transition by ensuring adequate safety nets for workers and facilitating retraining and relocation. but the benefits of integrative trade shouldn ’ t be ignored. it has meant increasing incomes for economies. it has made many products much more widely accessible to more people. and it has meant continued job growth at home. implications and alternatives my argument is that a significant part of the strong productivity performance in the two decades before the crisis was due to globalization, and that the globalization process may have brought trade in the global economy to a new balancing point. understanding this is one thing ; the question is what can be done about it. i see at least three reasons to hope for future progress. the first is that a lot of productivity growth comes not from existing firms, who tend to be incremental about it, but from new firms. a new firm with a new product or service tends to see giant leaps in productivity as it goes from being a start - up to the “ hockey stick ” growth phase. a firm only makes that transition once, but an economy can reap the benefit over and over if there is a strong trend in new firm creation. an expanding economy generally sees a pretty steady growth in the population of companies. under the surface, there is a steady rate of firm exit too. this is schumpeter ’ s process of creative destruction. so let me just point out that the growth of the population of companies slowed dramatically in a number of countries in the wake of the global financial crisis. i ’ ve been watching the canadian and us data closely, because i ’ d interpret the emergence of firm creation as a strong sign that growth had become self - sustaining. in the canadian data, firm population growth has picked up but remains slow, at around 1 per cent annually, well below pre - crisis rates. but in the united states, there has been a steady acceleration of firm population growth since 2011.

and there is a risk of future inflationary pressures, the bank will raise interest rates to cool off the economy. but importantly, inflation targeting also works the other way. when the economy is operating well below its production capacity and inflationary pressures are likely to ease, the bank will lower interest rates to stimulate growth. this was the situation we found ourselves in during the past year, as signs of the slowdown emerged. by working in a symmetrical way, inflation targeting helps to level out the peaks and valleys of the business cycle. it promotes sound growth while tempering economic ups and downs. and this benefits everybody. but the benefits of this framework go beyond its usefulness in setting monetary policy. it also helps reduce uncertainty about future inflation, by giving canada a credible anchor for its monetary policy. let me explain what that means. once the original agreement between the bank and the government came into effect in 1991, inflation quickly came down into the target range. but more importantly, measures of inflation expectations began to fall in line with the target range as well. at first, this applied to expectations of inflation over a 2 - year period. but the time frame lengthened gradually, and since 1997, inflation expectations have been essentially anchored on 2 per cent for 30 years into the future. this is important, because when inflation expectations are well anchored, the real economy works better. wage bargaining can become less contentious. and we have seen a trend towards fewer labour disruptions and a lengthening of collective bargaining agreements. with stable inflation expectations, investors can better assess the future value of their investments. at the same time, savers know the future purchasing power of their money will not be eroded by inflation. supporting our inflation - control framework is our flexible exchange rate system. although from time to time there may be excessive volatility in exchange markets, having a flexible exchange rate is important. this is particularly true for canada because we are a small, open, and relatively specialized economy. the structure of our economy is different from that of the united states. now, when we renewed the inflation - control agreement with the federal government last year, we strengthened the framework in four ways. we lengthened the term of the agreement to five years, which should reinforce its credibility. we clarified that we are aiming inflation explicitly at the 2 per cent midpoint of the target range. this emphasizes that we pay equal attention to the top and the bottom of the target range. we committed to providing an explanation in our key publications