paul jenkins : trends and challenges in the global economy and what they mean for canada and ontario remarks by mr paul jenkins, senior deputy governor of the bank of canada, to the london chamber of commerce, london, ontario, 2 april 2008. * * * good morning. first, i would like to thank the london chamber of commerce for inviting us here today. it's a pleasure for me to be back in london, given my close family ties and my years at the university of western ontario. as is the case for so many cities and regions in canada, london's economy and that of southwestern ontario are directly affected by changes in the global economy. and, as with so many things in life, the better we understand the forces of change, the better equipped we are to deal with them. what i'd like to do this morning is discuss some of the key trends in the global economy, as well as the challenges they present, and then talk about some of the implications for canada and for ontario. and because one of the main reasons that we have come to london is to hear your thoughts and concerns, i'll leave plenty of time for your comments and questions. macroeconomic trends in the global economy the turbulence in global financial markets, which has been with us since last august, continues to be a major focus. but rather than starting there, allow me to first step back and provide a perspective that covers the past five or six years. from 2002 to 2007, the world economy expanded strongly, growing by an average of 4. 6 per cent per year, measured in terms of real gdp. the growth of world trade was even more impressive, at about 7 per cent on an annual average basis. this period of robust growth benefited most nations, and was strongest in emerging - market countries such as china, india, and brazil. in industrialized countries, growth was also steady and solid. what we are now confronting is a marked slowdown in global economic growth, emanating primarily from the sharp correction under way in the u. s. housing market and the associated tightening in credit conditions linked to the collapse of the u. s. subprime - mortgage market. i will come back to discuss these financial developments in a moment. but in keeping with the theme of taking a longer - term perspective, it's important to note that some slowing in global economic growth was necessary. after five to six years of nearly unprecedented growth, levels of economic activity around the globe

of housing markets vulnerabilities is facilitated by consistency across all housing - related policies, including tax, planning and land supply policies that may have an impact on demandsupply imbalances in the housing market. in these interactions, the focus and added value of macroprudential policy for housing risks is to strengthen financial resilience. however, the perimeter of macroprudential policy for housing risks can sometimes be questioned. indeed, unlike other areas of macroprudential policy, housing - related macroprudential policies may have potentially large distributional consequences. but there are several ways in which such distributional costs can be mitigated, starting with the design of measures. flexibility margins are a common way to achieve this. the perimeter of macroprudential policy can also be challenged by developments in the financial sector. the role of non - banks in housing financing has to be carefully taken into account and may call, as in other areas, for the broadening of housing - related macroprudential policies beyond the banking sector. 2 / 3 bis - central bankers'speeches on this challenge of the interaction with other policies, i am sure that the panels on governance and on assessing the costs and benefits of macroprudential policy will be enlightening. conclusion i have underlined two interaction challenges for housing - related macroprudential policy – the interaction with the macroeconomic environment and the interaction with other policies. let me conclude by a third one that can help us to identify best practices and solutions : the interaction with other jurisdictions. compared with other macroprudential policies, cross - border leakages appear less relevant for housing risks. this does not mean that domestic housing risks cannot have an impact across borders : the 2007 - 08 financial crisis, which started with the spark of the subprime mortgage crisis in the united states, is a case in point. and this means that housing - related risks concern all jurisdictions, even if the structure of housing financing may be different. today we are gathered to reflect together on those important questions surrounding housing - related macroprudential policy - making and we have the opportunity to get inspired from what other jurisdictions around the globe are doing. i wish you fruitful and enlightening discussions throughout this conference. thank you for your attention. 3 / 3 bis - central bankers'speeches