The Stability of Money Demand in South Africa

Simiso Msomi () and Sanele Gumede ()
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Simiso Msomi: University of KwaZulu-Natal
Sanele Gumede: University of KwaZulu-Natal

Acta Universitatis Danubius. OEconomica, 2024, issue 20(4), 57-72

Abstract: The stability of money demand is central to South Africa’s monetary policy. Furthermore, it has implications on the work of the SARB which is the monetary authority of South Africa. Since year 2000, the SARB has been hawkish in its behaviour, which raises questions about stability of money demand. This is because for an inflation targeting economy that provides information to the public to stabilize the market, its money demand should be stable, thereby, making the behaviour of the central bank more stable. However, the behaviour of the SARB does not seem to portray that the demand for money in South Africa is stable. Hence, this study assesses the demand for money in order to comprehend its behaviour. The study uses CUSUM test to test for the stability of money demand. And it is found that before year 2015, money demand was stable. Hence, the money demand in South Africa is becoming unstable overtime. The sample data used in the study is from 2003 to 2023.

Keywords: monetary policy; stability money demand; inflation rate; economic growth; interest rate (search for similar items in EconPapers)
Date: 2024
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