u. s. demand for canadian products and the rebound from major labour disruptions in canada led to renewed vigour in our economy in the fourth quarter of 1998 which, by all indications, carried into early 1999. and this has been accompanied by healthy employment growth. as we look ahead, steadier financial markets, employment gains, and accommodative monetary conditions should bolster spending by canadian households and businesses. all this, coupled with sustained u. s. demand and our improved competitiveness, should continue to contribute to an expanding canadian economy. since world economic and financial conditions are still fragile and since the timing of a firm recovery in primary commodity markets remains uncertain, i cannot be more specific about how strong our economy will be. but we are now looking at a somewhat more positive scenario than seemed possible last autumn - - both for the world economy and for canada. what to do about future crises as much as we are all anxious to put this latest episode of global financial turbulence behind us, i hope that in one respect, at least, we won ’ t soon forget it. the fact that things are getting better should not distract us from devising strategies to reduce the risks of similar crises in the future. and should there be any, we need to be better prepared to handle them and to minimize their economic fallout. so what are some of the issues, and what is being done about them? it would be all too easy to blame globalization and unhindered, large, cross - border capital flows for the recent financial problems, and to suggest that we retreat behind national borders and place restrictions on the flow of capital. but it would be unwise. for even though capital flows may sometimes be difficult to manage, especially for small countries, the benefits from access to a bigger pool of world savings are substantial - - when those savings are used prudently and productively. what we must do is find ways to minimize the risks, without surrendering the benefits. there are three main areas towards which international efforts are currently directed : strengthening financial systems ; ensuring that countries follow responsible macroeconomic and financial policies ; and developing effective processes for managing crises when they arise. let ’ s look at these three areas. first, there is the need to encourage sound financial systems - nationally and internationally. some of the things being addressed here are accounting and disclosure standards, supervisory and regulatory frameworks, and bankruptcy procedures. why do we need to strengthen these practices? widely accepted accounting standards are

start of the year, and is currently being traded above 130 yen to the u. s. dollar. with regard to corporate finance, private banks appear to be more cautious in extending loans to firms with high credit risks while they continue to be more active in extending loans to blue - chip companies. the lending attitudes of financial institutions as perceived by firms are gradually becoming more severe. in corporate bonds and cp markets, the fund - raising conditions continue to be generally favorable particularly for firms with high credit ratings as seen in a slight decline in cp issuance rates, but the issuing environment for those with low credit ratings is deteriorating on the whole. credit demand in the private sector continues to follow a downtrend mainly because firms are decreasing their business fixed investment while continuously reducing their debts. amid these developments, private banks ’ lending continues to decline at about 2 percent on a yearon - year basis. as for the amount outstanding of corporate bonds issued, the year - on - year growth rate has been slowing due to a decrease in the issuance of corporate bonds with low credit ratings. the year - on - year growth rate of the amount outstanding of cp issued is declining recently, although the amount is still well above the previous year ’ s level. the year - on - year growth rate of money stock ( m2 + cds ) continues to be around three to four percent. funding costs for firms continue to be at extremely low levels on the whole, although market funding costs for some firms and the long - term prime lending rate are rising somewhat. overall, the recent financial environment remains extremely easy on the whole in terms of money market conditions and interest rate levels : additional monetary easing measures by the bank have increased liquidity in the money market and prompted declines in interest rates on term instruments and the issuance rate of cp with high credit ratings. however, the fund - raising conditions of firms with high credit risks, especially of small firms, are becoming severe as private banks and investors are becoming more cautious in taking credit risks against the background of a growing number of corporate bankruptcies. hence, the developments in the behavior of financial institutions and corporate financing need closer monitoring.