When the Asian crisis erupted in the summer of 1997, few observers anticipated that international financial markets would still be under its influence more than a year later.
As an economist who worked as a banker for most of his career, Douglas Gibson brought an interesting perspective to public policy issues, to the relationship between government and business, and to the contribution of outside economists to government policies.
This past year, we have had to deal with the implications for our economy and our currency of increased global uncertainty and pressures arising from the problems that originated in Southeast Asia. I am sure that the effects of these developments, especially on primary commodities, such as oil and nickel, are already very familiar to Newfoundlanders.
In mid-May we published our semi-annual Report on monetary policy, covering data up to April 24th. That means we now have new data available for the last two months. Furthermore, our report also pointed to a much greater-than-usual degree of uncertainty about the outlook for the Canadian economy.
Globalization—that is, the growing integration and interdependence of national economies—is changing dramatically the economic landscape. Countries are trading more goods and services, an increasing number of firms now operate across national borders, and savers and borrowers have greater access than ever before to global financial markets.
It can take anywhere from one to two years for monetary actions to have their full effect on the economy. Because of this, the conduct of monetary policy must be based on a view of what the economy will be like—not tomorrow, not in a month—but rather in one to two years' time.
A year ago, in early 1997, prospects for global economic growth were very promising. World economic activity had strengthened and was expected to accelerate further, with the benefit of low inflation, reduced fiscal imbalances, and stable or declining interest rates. In Canada too, output and employment growth had picked up.