in open economies under a floating exchange rate regime, monetary policy can be a much more effective stabilizer than discretionary fiscal policy. in the 1990s, governments in canada - both federal and provincial - struggled not only to eliminate budget deficits, but to run surpluses in order to bring down public debt - to - gdp ratios. given canada ’ s demographics, with an aging population and a workforce that is likely to stop growing within 15 years or so, aiming to reduce the debt - to - gdp ratio is an entirely appropriate fiscal anchor. of course, other countries may have different considerations that shape their medium - term fiscal plans. the importance of information sharing so far, i have argued that formal coordination of macroeconomic policies is unlikely to lead to better economic outcomes than if all countries simply followed the right policies for their own circumstances. in addition, coordination risks amplifying the effects of a mistake in judgment about the state of the global economy. but co - operation in the form of information sharing does play an extremely important role in the development of macroeconomic policy. let me elaborate. countries can put an appropriate policy framework in place ; but, without accurate and reliable information on the state of other economies, it is difficult to determine what policy actions will deliver optimal results. the canadian economy provides a clear example. given canada ’ s dependence on international trade, the bank of canada needs to thoroughly understand the forces at work in the world economy in order to adopt the appropriate monetary policy stance at home. otherwise, we risk misjudging the state of total demand in the domestic economy, and that can lead to policy errors. the increasingly interconnected nature of the world economy means that policy - makers in all countries must have a thorough understanding of global economic and financial developments. it is fitting that we should be discussing this topic here, in this building, given the oecd ’ s long history in economic co - operation. how does this information sharing among countries take place? in addition to oecd meetings, central bankers gather at the bank for international settlements every two months. in fact, i will be headed to basel for such a meeting in a couple of days. one of the most important features of these meetings is our systematic, detailed discussion of the world economic situation. these meetings, as well as the periodic meetings of the international monetary fund, the g - 7 and g - 20, and the financial stability forum, are important opportunities for policy - makers. not only can we hear directly

david dodge : cooperation and the conduct of economic policy remarks by mr david dodge, governor of the bank of canada, to the european economics and financial centre, paris, france, 24 june 2004. * * * good afternoon, ladies and gentlemen. i am delighted to be here and to have the opportunity to speak at this conference. the theme of this event is “ policy coordination in an integrated global economy. ” it seems as if the idea of policy coordination is making a comeback these days. this is probably because of the growing interconnectedness of the global economy and the series of shocks that have recently reverberated around the world. while globalization has affected different countries to varying degrees, it has brought many benefits to the world economy - including increased trade, broader sources of financing, and more rapid diffusion of technology. but globalization has also left countries more exposed to developments beyond their borders. from a central bank perspective, globalization has made the conduct of monetary policy somewhat more challenging. in order to gauge the prospects for the domestic economy, it is more and more necessary for central bankers to take into account how their economy will be affected by events elsewhere. and of course, central bankers in very large economies must be cognizant of the effects that their actions may have on the global economy and, hence, on their own economy. canada has had a very open economy for many years. so, not only is it in our interest to ensure that our domestic economic policies are the right ones, it is also in our interest that other countries pursue appropriate policies. as globalization continues, it will increasingly be in everybody ’ s interest that all countries follow sound economic policies. given this growing integration of the world economy, it might appear that there is a need for closer international coordination of economic policies. traditionally, talk of coordination has made people think of more formal arrangements, such as the plaza and louvre accords of the 1980s. not only did those agreements attempt to influence global exchange rates, they spelled out detailed prescriptions for individual countries in areas such as fiscal and monetary policy. i will argue today that the scope for macroeconomic policy coordination is very limited, although it is vital for policy - makers to co - operate in the sharing of information and views on monetary and fiscal policy. but i will also argue that there are some areas where coordination is required, most particularly in establishing and maintaining rules and standards that will allow global financial markets to function well and global trade to expand. the right economic policies let me