yandraduth googoolye : strengthening macro - prudential supervision in mauritius address by mr yandraduth googoolye, first deputy governor of the bank of mauritius, at the signing ceremony of the memorandum of understanding between the bank of mauritius and the mauritius revenue authority, port - louis, 31 december 2009. * * * ladies and gentlemen after a comprehensive address by the governor, i will not have much to add to what he has said. but, what i would do is to brief you about the salient features of the memorandum of understanding. but before doing so, i must say that after the global economic crisis, the buzz word all over is macro - prudential supervision. it is built on the clear lessons of the crisis that a set of financial institutions that are sound on a stand alone basis is not an assurance of financial stability. the real economy has to be treated as an endogenous part of the whole framework if systemic stability concerns have to be identified and mitigated. why i am saying this is because the mou that we are going to sign today is a critical part of our effort to strengthen macro - prudential supervision. let us look for instance one of the clauses of the mou. it says that mra will communicate to the bank aggregate data on various taxes collected with a view to allow the bank to gauge activities in the real sectors of the economy. this is an important data input for macro - prudential supervision. in fact this will make the process even more proactive rather than a reactive one. you will all agree that there is no alternative to being able to anticipate events and take remedial measures before a crisis assumes monstrous proportions. let me turn to the broad features of the mou now. this agreement has basically three important aspects : first, it contains the ground rules for cooperation between the bank and the mra. the mou emanates from the respective legislative framework governing the bank and mra. it is therefore subservient to it and furthers the objectives laid out in the respective acts. secondly, it sets out the specific areas for cooperation by detailing broadly the nature of information that one will provide to the other, areas in which they will collaborate with each other and underscores the need for use of technical expertise in one institution relevant for the effective discharge of responsibilities by the other. thirdly, it provides for a joint committee between the bank and mra that will

to be vocal in resisting calls for protectionism. current economic developments in canada having set out this global context, let me now turn to how canada fits into the picture. as i said at the outset, like barbados, canada has a very open economy, so how we deal with the current challenges is crucial to our economic health. we have been following policies that allow the canadian economy to adjust to global developments. let me say a few words here about my own area, which is monetary policy. canada's monetary policy consists of an inflation - targeting system, backed by a freely floating exchange rate. we aim to keep inflation at 2 per cent, the midpoint of a 1 to 3 per cent target range. under this regime, not only has inflation in canada remained near the target in recent years, but inflation expectations are now anchored near 2 per cent. as a result, market signals are sent and received more clearly, and canadian businesses and consumers are more confident about the future value of their money. a critical feature of our inflation - targeting system is that we operate symmetrically around our target. this means that we care just as much about inflation falling below target as we do about inflation rising above it. this symmetric approach helps keep the canadian economy near its production potential, thus encouraging strong, sustained growth in output and employment. another feature of our monetary policy is that we aim to be transparent. at the bank of canada, we believe that monetary policy is more effective when people understand what we are doing and why we are doing it. we publish regular reports and updates about our monetary policy. in the most recent update, published on 26 january, we noted that the canadian economy continues to adjust to global developments and to the associated changes in relative prices. as i said at the beginning, global economic growth is expected to remain robust - around 4 per cent this year and next. against this backdrop, we continue to judge that the canadian economy as a whole is currently operating at its production capacity. and we expect it to keep on growing roughly in line with its production potential through 2007. specifically, we project annual average growth of 3. 1 per cent this year and 2. 9 per cent in 2007. total consumer price inflation, which was at 2. 3 per cent in the fourth quarter of 2005, has been and will continue to be affected by changes in the prices of crude oil and natural gas. assuming that energy prices evolve in line with the prices reflected in futures markets, we expect total inflation