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Mark Carney Remarks-210513

Mark Carney Remarks-210513

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Published by ericaalini
Speech by BoC Governor Mark Carney
Speech by BoC Governor Mark Carney

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Categories:Types, Speeches
Published by: ericaalini on May 21, 2013
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 Not for publication before 21 May 2013
12:30 Eastern Time
Remarks by Mark CarneyGovernor of the Bank of CanadaChambre de commerce du Montréal métropolitain (CCMM)/ Board of Trade of Metropolitan MontrealMontréal, Quebec21 May 2013
It is almost six years since the start of the global financial crisis, and its dynamicsstill dominate the economic outlook.In the United States, households are emerging from a painful period of deleveraging. Their economic expansion continues at a modest pace, withgradually strengthening private demand partly offset by accelerated fiscalconsolidation. Despite recent progress, the U.S. economy has not yet achievedescape velocity.Europe remains in recession, with economic activity constrained by fiscalausterity, low confidence and tight credit conditions. Deep challenges persist inits financial system. Without sustained and significant reforms, a decade of stagnation threatens.Europe can draw lessons from Japan on the dangers of half measures. It is nowmore than two decades since the Japanese financial crisis erupted. To end itsdebilitating legacy, Japan has just embarked on a bold policy experiment. Itssuccess or failure will have a major impact on the outlook over the coming years. Amongst the G-7, Canada is unique. For us, the global financial crisis was an
rather than internal shock. When Canadian policy-makers respondedquickly and forcefully, our financial system channelled credit to where it wasneeded and our economy adjusted smartly. As painful as our recession was, Canada suffered less. By the start of 2011, all of the output and all of the jobs lost during the recession had been recovered(
Charts 1
). A further 480,000 jobs have been created since, with the vastmajority of them full-time and in the private sector. Nearly all the new jobs are inindustries that pay above-average wages.Relative to our peers, Canada is working.
- 2 -Why did we fare better? Our outperformance reflects four critical advantages:
 responsible fiscal policy,
 sound monetary policy,
 a resilient financial system, and
 a monetary union that works.
Chart 1: Canada: First G-7 country to recover lossesChart 2: Canada has more than fully recovered all jobs lost
9092949698100102104106IndexCanadaUnited StatesUnited KingdomGermanyJapanFranceItaly
Real GDP
Indexed 2007 Q4 = 100, seasonally adjusted quarterly data
Last observation: 2012Q4 CA; 2013Q1 all othersSource: Statistics Canada, U.S. Bureau of Economic Analysis, U.K. Office for National Statistics,Eurostat, Cabinet Office of Japan, and Bank of Canada calculations
20082009201020112012201392949698100102104106IndexCanadaUnited StatesUnited KingdomGermanyJapanFranceItaly
Indexed 2007 Q4 = 100, seasonally adjusted quarterly data
Last observation: 2012Q4 UK, IT; 2013Q1 all othersNote: Employment measured using national definition for each countrySources: Statistics Canada, U.S. Bureau of Labor Statistics, U.K. Office for National Statistics,Eurostat, Ministry of Health, Labour & Welfare of Japan, and Bank of Canada calculations
- 3 -I will discuss these foundations of our prosperity in more detail
but lastinggrowth depends on what is built on this foundation through longer-terminvestments in infrastructure, human capital, innovation and new markets.
A Monetary Union That Works
currencyunion: an integrated economy, fiscal federalism and labour market flexibility. Allow me to elaborate.
An integrated economy 
While the composition of provincial output varies, the Canadian economy ishighly integrated. Consider the case of commodities.When commodity prices increase, all provinces benefit. All else equal, theCanadian dollar appreciates. Its adverse impact on our non-commodity exports ispartially offset by the fact that a stronger currency reduces the cost of productivity-enhancing machinery and equipment and imported inputs toproduction.
Various mechanisms distribute benefits across provinces: fiscalpolicy; increases in personal wealth through income and ownership of stock; andmovements in internal real exchange rates and interprovincial trade.
 During the recession and its aftermath, the importance of interprovincial tradewas clear. For example, the increased demand from other provinces for Quebec
goods and services significantly offset lost international exports(
Chart 3
).Movements in provincial real exchange rates are another important part of theadjustment process. Although there is one exchange rate for Canada as a whole(we all use Canadian dollars), price differentials across the country yield differentreal provincial exchange rates.This matters.
Chart 3: Trade between provinces helps offset weakness in internationaltrade
NLPENSNBQCONMBSKABBC-30-20-100102030Interprovincial ExportsInternational Exports
Percentage change in real international and interprovincial exports
Last observation: 2011Source: Statistics Canada

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