interest rates in january 2015. and, as companies cut their investment intentions further, we lowered interest rates again the following july. to be clear, our economic models correctly predicted that the collapse in oil prices would be a serious blow. specifically, our main policy model gave us invaluable insights into how the shock would affect the economy and how the subsequent adjustments would unfold. but the fact that everything we were hearing was supporting these insights increased our confidence that cutting rates was the right course of action. adjusting to lower oil prices obviously, the drop in oil prices was a significant detour for the canadian economy. we knew that the shock would trigger a complex series of adjustments and create significant hardship for many people. basically, our models projected that the economy would go through the reverse of its experience in 2010 – 14, when high oil prices led to strong increases in business investment and national income. provinces where the energy sector is relatively more important, such as newfoundland and labrador, would feel these effects most acutely. this underscores one of the fundamental challenges for policy - makers, that economic shocks can have very different effects across canada ’ s regions. in terms of adjustments, we anticipated that lower oil prices would mean not only a decline in the energy sector, but also a pickup in growth in the non - energy sector. we expected exports to be boosted by a lower canadian dollar. and, as exporting companies reached their capacity limits, we expected to see business investment increase. stronger exports and investment would complement household spending, and growth would become more broadly - based and selfsustaining. certainly, adjustment in the energy sector has been painful. beyond cuts to investment spending, oil companies restructured operations and laid off workers. employment in the resource sector fell by roughly 50, 000 jobs from the beginning of 2015 to the middle of last year. despite this, companies boosted production and exports of crude oil as earlier investments were completed and as they found greater efficiencies. and, since oil is priced in us dollars, the decline of the canadian dollar also helped cushion the impact of the shock. the increased output and weaker currency helped to offset almost half of the $ 60 billion decline in revenue from oil shipments, boosting exports by about $ 25 billion. 2 / 5 bis central bankers'speeches that said, canada ’ s other exports took longer to recover than we anticipated. exporting companies had taken a significant hit both during and after the global financial crisis. many disappeared, to be

off sharply, since banks needed to repair their balance sheets and comply with more - stringent regulatory capital requirements. so how does canada fit in? we have traditionally been a capital importer. our current account balance — the difference between how much we invest and how much we save — has typically been in deficit to the tune of 2 – 3 per cent of gdp. we have depended on external financing to fund this gap. in the early 2000s, strong foreign demand and high commodity prices raised our national incomes, and we ran current account surpluses for a number of years. during those years we exported capital to the rest of the world ( chart 4 ). since the global financial crisis, foreign demand has been on a weaker track and commodity prices are lower. our current account is again in deficit and, once more, we are relying on capital imports from the rest of the world. benefits and challenges of financial globalization as i ’ ve already mentioned, opening up an economy to capital flows brings both benefits and challenges. benefits the benefits of financial globalization are similar to those of free trade. open borders create opportunities for transactions that benefit both parties because of their differences in endowments or preferences. for example, a country where a large share of the population is of working age can benefit from being able to channel its savings to other countries — a net capital outflow. as the country ’ s population ages further and more of its citizens retire and start to draw on their savings, foreign assets are liquidated, generating a capital inflow from the rest of the world. cross - border investments, which give rise to gross capital flows, enable investors to diversify risk. canada ’ s pension funds have, for example, used international opportunities to effectively provide more - secure retirement income for canadians. fdi brings other benefits, since it bundles financing and know - how. this helps residents of the investing country use these capabilities where they can be most see committee on international economic policy and reform, banks and cross - border capital flows : policy challenges and regulatory responses, september 2012. - 6productive and creates opportunities in the recipient country. over the years, canada has benefited from sizable flows of fdi in both directions. chart 3 : banking flows are the most volatile capital flows per cent of group gdp, four - quarter moving average % - 10 fdi direct inflows portfolio inflows derivative inflows gross inflows other inflows source : imf world economic outlook. imf balance of payments