mr. thiessen elucidates why he is optimistic about the prospects for a stronger canadian economy notes for remarks by the governor of the bank of canada, mr. gordon thiessen, to the canadian association for business economics and the ottawa economics association in ottawa on 21 / 3 / 97. anyone who has read our last monetary policy report, the winter issue of the bank of canada review, or our just - released annual report knows that the bank has been positive about canada ’ s economic outlook. basically, we are looking for a solid pickup in the pace of economic expansion in coming months, with inflation remaining low. and, with improvements in the basic foundation of our economy, we see the potential for sustained good economic performance over the medium term. not everyone is as upbeat as we are. some analysts are rather sceptical, especially of the fairly strong recovery that we foresee in household spending. they see canadian households carrying too much debt, a personal savings rate that is already too low, and an unemployment rate that is too high to sustain much of an increase in spending. others seem to have difficulty reconciling an optimistic outlook on the rate of economic expansion with a scenario of continued low inflation. in this group, some are afraid that the bank will react too quickly to an acceleration of inflation, frustrating the economic recovery. another camp is worried that the bank will let inflation get away, with all the costs that that would entail. today, i would like to use this opportunity to address some of these issues. i believe that i can offer good reasons - - and monetary policy is one of them - - why we in canada should be upbeat about our economic future. why is the bank optimistic about an expanding economy? the canadian economy has been undergoing extensive transformation. and clearly we are not out of the restructuring woods yet. this restructuring has been spawned by rapid technological advancements, increasingly open and competitive world markets, the decline of inflation in canada from the high levels of the past, and the need to reverse an unsustainable trend of debt accumulation, particularly by canadian governments. but over the last few years, canada has made great strides in dealing with these issues. as a result, i believe that we now have a much more efficient and competitive private sector. we also have a fundamentally improved macroeconomic policy situation. fiscal policy has been successful in reducing deficits, and governments have been moving towards less vulnerable debt positions. inflation is low and relatively stable within the

well. conclusion canada and chile have benefited greatly from the strong global economic growth of recent years. but the global economy could suffer if policy actions are not taken to deal with global imbalances. in this context, i have spoken of domestic policies that are particularly important for countries such as ours : structural reforms to encourage economic efficiency and flexibility, a sustainable fiscal policy, and a monetary policy based on inflation targeting. by following these domestic policies, both canada and chile will be well placed to handle developments in the global economy, whatever those may be. but we also need to work together to shape that global economy. we need to support free trade in goods and services and to resist protectionism. and, as i said, we - together with other countries - need to make the international financial system as efficient and effective as possible. an important part of this effort will be to modernize the imf. with strong domestic policy frameworks and a strengthened international financial system, chileans and canadians can look forward to continued strong economic growth in the years ahead.