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I am delighted to be with you this evening to celebrate the 35th annual meeting of the Mennonite Savings and Credit Union. On this occasion, I propose to speak about the Canadian economy and monetary policy. But given this audience, I thought I might start with some remarks on the future of the Canadian financial sector - a subject that has certainly grabbed its share of headlines over the past year!

Can regulation solve problems arising from a natural monopoly? This paper analyzes whether “unbundling,” referring to regulations that enforce sharing of natural monopolistic infrastructure, prevents entrants from building new infrastructure.

This paper examines the quality of projections of real GDP growth taken from the Bank of Canada Monetary Policy Report (MPR) since they were first published in 1997. Over the last decade, it has become common practice among the central banking community to discuss forecast performance publicly.

The Bank of Canada is keenly interested in productivity - for a number of reasons. Productivity gains are a key determinant of growth in potential output and, hence, of Canada's sustainable pace of non-inflationary economic expansion.

The authors apply existing inflation models that have worked well in industrialized countries to Mexico, an emerging market that has recently moved to adopt an inflation-targeting framework for monetary policy. They compare the performance of these models with a mark-up model that has been used extensively to analyze inflation in Mexico.

In 2005, the Bank of Canada celebrated its 70th anniversary. Since the Bank opened its doors in March 1935, it has evolved into a national institution at the heart of Canada’s economy. We had a lot to celebrate in 2005—particularly our progress over the past 70 yearsand our continuing contribution to the economic and financial well-being of Canadians.

The preamble to the Bank of Canada Act calls on us to promote the economic and financial welfare of Canada. In this context, we aim to foster good economic performance through monetary stability - that is to say, through low, stable, and predictable inflation. But no market economy can function properly unless it is also supported by an efficient and stable financial system.

Governor Poloz discusses some key indicators the Bank is watching as the Canadian economy heads toward sustainable balanced growth.

For several decades, the prices of services have been rising more rapidly than the prices of goods in Canada and the other major industrialized countries. In 2002, this gap between the growth rates of these two components of the consumer price index (CPI) widened considerably, leading researchers to ask if this was the beginning of a trend. Analysis reveals, however, that the gap is based on short-term dynamics and that it appears to be independent of the trend in the development of the overall price level. Evidence also shows that the gap is eventually reabsorbed. The authors examine a number of potential causes for the prices of services to rise faster than those of goods. These include the more rapid pace of productivity growth in the goods sector, the greater openness of goods to foreign trade, and stronger growth in the demand for services.

Measures have been taken by the Bank of Canada to increase the transparency of Canadian monetary policy. This paper examines whether the greater transparency has improved financial markets' understanding of the conduct of monetary policy.