modest and unemployment to come down only gradually. in most advanced countries the recovery remains dependent on monetary and fiscal stimulus. private demand is recovering, but the hand - off from public stimulus to private demand has yet to be accomplished. with fiscal policy expected to begin to withdraw stimulus in the coming year, monetary policy is likely to remain stimulative for some time. globally, the modest recovery in advanced countries is being balanced by continued strong growth in most emerging market economies. policy responses and strengthened economic frameworks are helping emerging economies to boost internal demand, although in some cases this needs to be supported by greater exchange rate flexibility. the international monetary fund ( imf ) predicts that annual growth for 2011 in emerging economies will be about 6½ per cent, while worldwide growth is projected to be about 4¼ per cent in 2011. as you know, canada withstood the crisis better than most other countries, thanks to solid foundations – a mortar mix of good management and sound policy. looking ahead, the imf expects canada ’ s economic recovery to be among the strongest of the g - 7 countries over the next two years. nonetheless, by historical standards, this is still a modest recovery. globally, the costs of this crisis have been enormous. economic output in the g - 7 countries fell by almost 5 per cent from peak to trough with output losses of $ 2 trillion for the global economy. in canada, gdp fell by more than 3 per cent from peak to trough, with output losses at $ 50 billion and 400, 000 jobs lost. canada has now recouped these lost jobs, but has not recovered the lost momentum and opportunity the crisis left behind. there is a great deal to fix to prevent such losses happening again. much of this has to do with aligning incentives and enhancing risk management and governance in the private sector, strengthening financial regulation and supervision, and improving core financial infrastructure. but today i want to focus on the lessons of the great recession for monetary policy. what ’ s worked well let me start with what worked. in the early 1990s, price stability became entrenched as the primary objective of monetary policy. this reflected both the bitter experience with inflation since the early 1970s and a growing consensus that price stability was the best contribution monetary policy could make to the welfare of canadians. in 1991, the objective of price stability was formalized and canada became only the second country in the world, following new zealand, to target inflation. that same year, i was a relatively

david dodge : staying the course speech by mr david dodge, governor of the bank of canada, during a panel discussion at the banco de mexico, mexico city, 12 november 2002. * * * the dramatic events of the last two years and growing concern about the near - term prospects for the global economy have created a climate in which policy - makers focus only on current economic developments and lose sight of longer - term goals. there's a natural tendency to focus on the here and now, and to use any tools that are readily at hand to deal with today's problems, without proper regard for their long - term consequences. it's easy to forget the hard - learned lessons of the past and overlook the longer - term fundamentals that are necessary to support a strong recovery and sustained positive economic performance over time. what are those fundamentals? mr. greenspan, in his opening remarks to this conference, talked about the importance of the fundamentals, going all the way back to adam smith. what's interesting is that things have not changed that much. but we don't have to reach that far in history for guiding principles. we can look at the four key principles that emerged as part of the oecd consensus during the 1980s. the first principle relates to monetary policy. it basically recognized price stability as the appropriate goal for monetary policy over the medium term. policy - makers were advised to respond symmetrically, and in a forward - looking manner, to excess demand and supply so as to keep the economy on an even keel, thus achieving price stability and maximizing output over the medium term. the second principle applied to fiscal policy and the need for a more disciplined approach to managing the public purse. rising debt levels and an aging population made it clear that concrete action was necessary to eliminate deficits and put the debt - to - gdp ratio firmly on a declining path. automatic stabilizers should still be allowed to work during economic downturns. but in good times, surpluses would be generated that would help preserve the budget balance and keep the debt - to - gdp ratio on a downward trend. the third principle focused on the need for wide - ranging structural reform to reduce rigidities and inefficiencies. this meant removing burdensome regulations and legislative restrictions and eliminating wasteful government expenditures and distortionary tax and subsidy systems. the fourth, and final, principle called for trade liberalization. it was based on the premise that only through freer international trade can countries