carolyn wilkins : opening remarks - “ toward the 2021 renewal of the monetary policy framework ” opening remarks ( delivered virtually ) by ms carolyn a wilkins, senior deputy governor of the bank of canada, at the bank of canada workshop “ toward the 2021 renewal of the monetary policy framework ”, ottawa, ontario, 26 august 2020. * * * bonjour tout le monde, et bienvenue a notre colloque virtuel. thank you all for joining our workshop on the renewal of the bank of canada ’ s monetary policy framework in 2021. renewal is just around the corner — hard to believe. bank researchers have made a lot of progress since we kicked off our workplan in 2018. that seems like a thousand years ago given the current health and economic context. at that time, in a speech at mcgill ’ s max bell school of public policy, i laid out the main challenges confronting us as we did our work. we are looking forward to the conference they will host on this topic in september. one challenge i laid out in that speech has become crystal clear today : central banks are likely to run out of conventional firepower if we see an economic downturn in a low - interest - rate world. another challenge is that long periods of low interest rates encourage investors to take on risk that may be excessive. we see that now with high levels of indebtedness, not only in canada, but around the world. global debt - to - gdp is nearly 350 percent — much higher than at the time of the global financial crisis. these challenges led us to focus our research on three questions : first : can we articulate another framework that will do a better job than the inflation - targeting framework that ’ s been in place for over 25 years? to answer this, we are running a horse race among alternative frameworks for monetary policy. these include average inflation targeting, price - level targeting, an employment - inflation dual mandate and nominal gdp growth and level targeting. another possibility is to raise the inflation target. we are evaluating these frameworks against a clear set of criteria. of course, we are looking to see how well they can achieve stability in the economy and in prices so that businesses and families can make decisions with more confidence. we ’ re considering the implications for accountability, communications and credibility. we ’ re also looking at more novel criteria : how each framework impacts the distribution of income and wealth, and how robust the frameworks are in good economic times and bad. you

important financial market utilities. more recently, we have also created an office of financial stability policy and research at the federal reserve board. this office coordinates our efforts to identify and analyze potential risks to the broader financial system and the economy. it also helps evaluate policies to promote financial stability and serves as the board ’ s liaison to the fsoc. international regulatory coordination as a complement to those efforts under dodd - frank, the federal reserve has been working for some time with other regulatory agencies and central banks around the world to design and implement a stronger set of prudential requirements for internationally active banking firms. these efforts resulted in the agreements reached in the fall of 2010 on the major elements of the new basel iii prudential framework for globally active banks. the requirements under basel iii that such banks hold more and better - quality capital and morerobust liquidity buffers should make the financial system more stable and reduce the likelihood of future financial crises. we are working with the other u. s. banking agencies to incorporate the basel iii agreements into u. s. regulations. more remains to be done at the international level to strengthen the global financial system. key tasks ahead for the basel committee and the financial stability board include determining how to further increase the loss - absorbing capacity of systemically important banking firms and strengthening resolution regimes to minimize adverse systemic effects from the failure of large, complex banks. as we work with our international counterparts, we are striving to keep international regulatory standards as consistent as possible, to ensure that multinational firms are adequately supervised, and to maintain a level international playing field. thank you. i would be pleased to take your questions. bis central bankers ’ speeches