In the long run, the level of output that an economy can generate depends on the capital stock, the labour supply and the productivity of factors of production. In the steady state, all these factors are outside the scope of monetary policy. Given that monetary policy cannot determine the long-run values of real economic variables then, the argument goes, it is best to let monetary policy focus on what it can really control, namely nominal variables or, in other words, prices. This brings me to my first proposition: by and large monetary policy cannot affect real economic developments in the long run. The long-run potential output of an economy depends on structural features of the economy, including demographic developments, labour force participation rates, levels of educational attainment and efficiency in product and labour markets. It also depends on the transformation of savings into investment, that is, the proper functioning of banks and financial markets. Success in these domains depends on other  2  policy makers, notably governments, which can undertake structural reforms and often play a major role in the provision of education. So what can monetary policy actually do? In the near term, monetary policy nevertheless has a role to play. By influencing aggregate demand, it can cushion the economy from the impact of adverse shocks. In this way, it can limit the volatility of output from its long-run, or potential, level. Moreover, by sustaining demand in the short run, it can prevent a cyclical downswing in the economy from becoming entrenched.

I want to stress here, as one of our colleagues noted last year’s commemoration that financial service providers have to provide the products and services that the people want and not what providers think they want. Distinguished Guests, recognising that financial exclusion is more prevalent in rural areas, the Bank of Zambia has adopted various initiatives to improve rural financial inclusion in line with the national Rural Finance Policy and Strategy of 2012. These initiatives include: 1. leveraging digital financial services for general financial transactions; and 2. facilitating expansion of general services access points network of health, education, and agricultural organisations into financial access points through partnership and Government support. In line with this year’s World Savings Day theme: ‘Be Money Smart: Savings Give Life a Lift!’, I urge members of the public to select and demand appropriate formal financial products for their key life events, such as, births, education and health, and to be aware of the obligations and responsibilities associated with the products. I encourage financial service providers to take time to explain clearly and simply the terms and conditions of financial products so that consumers can understand their rights and obligations. 2  KEYNOTE SPEECH BY DR DENNY KALYALYA, GOVERNOR, BANK OF ZAMBIA AT THE 2019 WORLD SAVINGS DAY EVENT ON 31ST OCTOBER 2019 AT THE INTERCONTINENTAL HOTEL, LUSAKA  Distinguished Ladies and Gentlemen, may I take this opportunity to congratulate all the individuals and institutions that will receive Financial Literacy Awards for making a difference in the Financial Literacy Campaigns nation-wide.