In the current crisis, monetary policy is said to have played a role in contributing to excessive risk-taking behavior in the period leading up to the crisis, but monetary policy is also powerful in handling the economic and financial downturns through aggressive actions on interest rate and the provision of liquidity. This shows that it is crucial to get the stance of monetary policy right early by formulating monetary policy in a forward-looking manner. This, of course, is easier said than done. And the last lesson is communication. One lesson we learnt clearly from the crisis is that policy actions alone cannot ensure a successful outcome without the support of an effective communication strategy. In this crisis, the Fed has demonstrated the importance of this to the highest level through its ability to articulate its understanding of the situations, to communicate the rationale for the use of unconventional measures, its approach to making the results of the stress-testing exercise public, as well as its ability to manage market expectations while maintaining policy credibility. All these have been instrumental to the success so far of the Fed’s policy response. It is, therefore, clear from the crisis that wellexecuted and credible communication can help anchor market expectations. Let me now turn to my second remark on strengthening the monetary policy framework. I agree much with what has been said about the need to improve bank regulation and supervision going forward, especially to reduce procyclicality in the financial system.
Caleb Fundanga: The cost of capital – wither the Zambian financial markets? Keynote address by Dr Caleb Fundanga, Governor of the Bank of Zambia, at the Zambia Institute of Chartered Accountants Annual Business Conference on “Change and the Paradigm Shift in the Accounting Profession”, Livingstone, 6 August 2010. *  *  *  The President of the Zambia Institute of Chartered Accountants; Mr Chintu Mulendema The Chief Executive of the Zambia Institute of Chartered Accountants; Mr Hapenga Kabeta Distinguished members of the Eastern, Central and Southern African Federation of Accountants Members of the Zambia Institute of Chartered Accountants Members of the Press Distinguished Guests Ladies and Gentlemen The theme for this symposium portends an important aspect of our daily lives, either at individual or corporate level. We are all, one way or the other, affected by developments in our financial markets. The role that finance plays in an economy is certainly an important one and you do not need to go far back in history for you to appreciate that role. You only need to make reference to the recent financial crises to appreciate the potency that finance has on economic activities. Chairperson, your choice of this topic therefore could not have been more appropriate. This topic is also timely given the current challenges that face many countries in the aftermath of the recent financial crisis, some of which seem to be just unfolding in some European countries.