tolerance before they buy a stock. surely then, the company issuing that stock should be able to give those investors some honest disclosure of their assessment of the risks involved in that investment. the fallout from enron has prompted debate about the need for tougher financial market rules. if it is determined that new rules need to be written, they must not be picayune regulations that simply give the unscrupulous a roadmap to evade the spirit of the rules. it is the observance of the spirit as well as the letter of the regulations that we all must aspire to achieve. and when unscrupulous market participants or practices are revealed, authorities must come down on them with full force. to do otherwise is to do markets a disservice. only strict reprobation will restore and maintain confidence that the rules are being enforced. regulatory and supervisory bodies around the globe have begun to deal with the fallout from enron and other high - profile bankruptcies. in the united states, the financial accounting standards board is looking at proposals to determine when so - called “ special - purpose entities ” should be consolidated on company balance sheets. the securities and exchange commission has proposed new rules for more detailed and timely corporate disclosure. here at home, the canadian institute of chartered accountants ( cica ) has asked its accounting standards oversight council to closely monitor the accounting and financial reporting issues raised by enron. the cica is also looking at ways to boost auditor independence. i am also aware that the accounting profession and its regulators are working to develop an oversight body to promote highquality audits of public companies. the toronto stock exchange has made changes to its guidelines for effective corporate governance. parliamentary committees such as the senate banking, trade and commerce committee have also launched their own investigations into the canadian market post - enron. the market is responding we have seen much self - evaluation by market participants in recent months. i am very encouraged by how seriously these issues are being taken. the market is enforcing its own discipline. corporate boards are re - examining their roles and taking a closer look at what is being done in their companies. investors are demanding greater reconciliation between pro forma financial statements and generally accepted accounting principles. major firms, in response to those demands, are changing their corporate reporting methods. for example, some firms have announced plans to include, as an expense, the cost of executive stock options. and standard and poor ’ s has introduced new benchmarks for reporting corporate earnings.

inflation, let me take a step back to look at the larger, international picture. as i mentioned a moment ago, canadians have become increasingly aware of price pressures, but this is, in fact, a global phenomenon. indeed, sharp increases in inflation have been reported in both advanced and emerging - market economies in recent months. it is true that world prices of oil, natural gas, many minerals, and food products have eased in the past few weeks. nevertheless, earlier dramatic increases in the prices of these same commodities accounted for sharp increases in inflation. in many cases, these have been some of the highest rates of inflation observed in the past 10 to 15 years. it is important to note that inflation performance varies widely across countries. in some cases, excessively loose monetary policies, implemented in an attempt to push economic growth higher than the sustainable limits of a country's production capacity, have also been an important contributing factor. in many countries, the recent surge in inflation has been coupled with a dramatic slowing in real economic growth, rekindling memories of the 1970s and concerns over stagflation – the uncomfortable combination of high inflation and slow or negative growth. most observers believe it would be too great a stretch to draw parallels between the current experience and that of the 1970s. still, recent developments do pose a serious policy challenge for central bankers, especially when combined with the dislocation and difficulties evident in global financial markets. conventional monetary policy reactions might not be appropriate in circumstances where we see a combination of rising inflation, slowing gdp growth, and concerns about financial instability. rising inflation, for example, often leads to calls for tighter monetary policy. yet, would that be wise if a slowing economy and other developments were expected to reverse these inflation pressures in the future? slower economic activity often leads to calls for easier monetary policy. but would that reaction be wise if inflation pressures were believed to be rising rather than receding? around the world, monetary authorities are determined not to repeat the policy errors of the 1970s, when overly stimulative measures led to double - digit inflation and rising inflation expectations. we all seek reliable indicators with which to gauge how serious and longlasting the current inflation pressures might be. this kind of information can materially affect the stance of monetary policy. this illustrates why monetary policy - makers must gather and weigh as much information as possible in their decision making – and why inflation research is so important. defining and measuring total and core cpi inflation before i describe some of our