bank of canada ’ s own forecasts overestimated global growth by an average of half a percentage point each year in the past four. private sector consensus forecasts were off by even more. 1 the slow and halting recovery is partly the result of a number of cyclical factors that are taking years to sort out, including deleveraging in the private and public sectors. it is also the result of deeper structural trends that are driving down the global economy ’ s potential to grow. potential gdp growth at the global level declined from a peak of about 5 per cent in 2005 to just over 3 per cent this year, according to bank of canada estimates. 2 this is huge. a 2 - percentagepoint reduction in global potential growth translates into us $ 1 1 / 2 trillion in foregone output 1 / 8 bis central banker's speeches around the world in 2016 alone. if that pace is maintained, foregone output will rise to just under us $ 9 trillion five years from now. the slowdown has been widespread, although potential growth varies widely across countries. china ’ s potential growth is estimated to be around 6 1 / 2 per cent, down from just over 10 per cent. 3 in advanced economies, it is much lower — around 1 1 / 2 per cent in canada and around 1 3 / 4 per cent in the united states, for example. 4 potential output is made up of two parts — labour supply and labour productivity. both are contributing to the slowdown in global potential growth. labour force trends will continue and the numbers are striking : growth in the working - age population will fall at the global level from around 1 per cent to 0. 6 per cent over the next two decades. 5 it is difficult to precisely quantify the impact of demographic factors in terms of growth because a tighter labour market should, over time, drive wages up. higher wages may persuade some workers to postpone retirement or join the labour force but are unlikely to reverse the tide. so far in canada, demographic effects have been only partly mitigated by increased participation rates of older workers. 6 the wild card here is the second component of potential output — labour productivity. unlike the growth of the workforce, which is mostly driven by demographic trends that are predictable and evolve at a glacial pace, productivity growth can change more quickly. and big technological innovations that fuel sea changes in productivity — such as electricity and the semiconductor — are difficult to foresee. so far this century, productivity growth has

implementation frameworks and to assess a number of issues related to the consideration of alternative frameworks. i hope the work and ideas presented and discussed over the next two days will spur subsequent research on these issues and promote further collaboration among all of you. as i have often stressed before, in addition to its responsibilities for monetary policy and financial regulation and supervision, the federal reserve takes very seriously its role as a research institution. i want to thank our research conference committee for putting together this high - caliber research conference, which has gathered distinguished speakers and guests from around the world and, i am sure, will add to our understanding of the implementation and transmission of monetary policy. welcome to the federal reserve board. i hope you all have enjoyable and productive discussions over the next two days. bis central bankers ’ speeches