The stability of demand for money in the proposed Southern African Monetary Union

Simplice Asongu, Oludele Folarin and Nicholas Biekpe

International Journal of Emerging Markets, 2019, vol. 15, issue 2, 222-244

Abstract: Purpose - The purpose of this paper is to investigate the stability of demand for money in the proposed Southern African Monetary Union (SAMU). Design/methodology/approach - The study uses annual data for the period 1981 to 2015 from ten countries making-up the Southern African Development Community. A standard function of demand for money is designed and estimated using a bounds testing approach to co-integration and error-correction modeling. Findings - The findings show divergence across countries in the stability of money. This divergence is articulated in terms of differences in cointegration, CUSUM (cumulative sum) and CUSUMSQ (CUSUM squared) tests, short run and long-term determinants and error correction in event of a shock. Policy implications are discussed in the light of the convergence needed for the feasibility of the proposed SAMU. Originality/value - This study extends the debate in scholarly and policy circles on the feasibility of proposed African monetary unions.

Keywords: Bounds test; Demand for money; Stable; E41; C22 (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: The Stability of Demand for Money in the Proposed Southern African Monetary Union (2019)
Working Paper: The Stability of Demand for Money in the Proposed Southern African Monetary Union (2019)
Working Paper: The Stability of Demand for Money in the Proposed Southern African Monetary Union (2019)
Working Paper: The Stability of Demand for Money in the Proposed Southern African Monetary Union (2019)
Working Paper: The Stability of Demand for Money in the Proposed Southern African Monetary Union (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-08-2018-0443

DOI: 10.1108/IJOEM-08-2018-0443

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