targets. nonetheless, it is my qualitative assessment that those improvements have taken place. and the targets have certainly had a major impact on the bank itself. with respect to transparency, we found that explicit targets provided a strong incentive that encouraged us to become more forthcoming about how we would operate to achieve those targets. as i have discussed elsewhere, 11 we have taken initiatives to explain more fully our assessment of economic developments and our outlook for output and inflation. we have clarified how we make judgments about the actions needed to achieve the inflation target, and how we operate in markets to implement those judgments. moreover, the bank ’ s senior staff now spends much more time than before on public explanations and discussions across the country about monetary policy and central bank operations. all these initiatives were designed to make the implementation of monetary policy and the achievement of the targets more effective. explanations and discussions are also part of the process whereby the bank is accountable to the public for its actions. accountability implies that the central bank must either achieve the target or explain what unanticipated events caused it to miss the target and what it is doing to rectify the situation. thus, we have a strong incentive to ensure that the public is well informed about the circumstances that could affect our achievement of the objective. it is not surprising that in some countries inflation targets and increased autonomy for the central bank have gone hand in hand. an autonomous central bank has traditionally fitted somewhat awkwardly into a democratic society. 12 however, once targets are set and the central bank is charged with achieving those targets, it is much more feasible for parliament and the public to hold the managers of monetary policy to account for their performance. thiessen ( 1995 ). see rasminsky ( 1966 ). in canada, no new arrangements for central bank accountability have been put in place since 1991. but in fact the existing arrangements have adapted quite well to an inflationtargeting environment. the bank of canada act gives the bank ’ s board of directors the responsibility for ensuring that the institution is well run. 13 this includes assessing the performance of the governor and of the other members of the governing council, who are responsible for managing the bank. 14 the inflation targets have made those performance assessments more straightforward. when it comes to monetary policy - - the bank ’ s most important responsibility - there is now a clear measure of what constitutes successful performance. the second part of the accountability arrangement for the bank of canada is the directive power given to the minister of finance under section

14 of the bank of canada act. with the new practice of agreed targets between the bank and the minister, the directive power, which has never been used, now seems even less likely to be used. nonetheless, if there were a fundamental disagreement on the targets when they came up for renewal, the minister could impose his will via a directive. that would likely lead to the governor ’ s resignation and a new governor, who was prepared to accept the desired targets, would have to be chosen. 15 as long as no directive is in force, the bank must take full responsibility for its monetary policy actions. however, this directive power implies that the minister must also take a broad, ultimate responsibility because he has the power to change monetary policy. quite evidently, this is a power to be used only in extreme circumstances. nevertheless, this arrangement defines the nature of the bank ’ s relationship to the minister of finance in the area of monetary policy. in today ’ s world, the accountability of public institutions goes beyond traditional legislated arrangements. in democratic societies, the general public now demands much more information and accountability for performance from public institutions. here again, by establishing a clear performance objective, the inflation - control targets have made it easier for the bank to account for its stewardship to parliament and the general public. improved internal decision - making the explicit target for policy and the associated increase in transparency and accountability of the bank of canada have also had an impact on our internal decision - making processes. other central banks that have adopted inflation targets have also noted the improvement in the process of internal decision - making that has resulted. 16 the improved the directors of the bank are appointed by the government for three - year terms. by tradition, there are two directors from ontario, two from quebec and one from each of the other provinces. the governing council is composed of the governor, the senior deputy governor and the four deputy governors. in addition, if the minister decided that the actions that the bank was taking to achieve the agreed targets were inappropriate, he could use the directive power. once again, this would be an expression of no confidence, which would probably lead to the governor ’ s resignation and replacement. haldane ( 1995 ). decision - making can be attributed largely to the focus on a clear objective and the consequent need to develop a robust framework that maximizes the likelihood of realizing that objective in the light of the long lags between monetary policy actions and their effects on inflation. the inflation -