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The Stability of Money Demand in South Africa, 1965-1997

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  • Kevin S. Nell

Abstract

After the adoption of more market-oriented monetary policy measures in 1980, the South African Reserve Bank primarily relied on setting predetermined growth targets for M3 to achieve its primary objective of price stability. The main purpose of this paper is to test empirically whether there exists a stable long-run demand for money function over the period 1965-1997. The empirical results suggest that there exists a stable long-run demand for money function for M3 in South Africa, while the demand for M1 and M2 display parameter instability following financial reforms since 1980. The results largely support the South African Reserve Bank's view that the M3 money stock could serve as an indicator for monetary policy.

Suggested Citation

  • Kevin S. Nell, 1999. "The Stability of Money Demand in South Africa, 1965-1997," Studies in Economics 9905, School of Economics, University of Kent.
    • Handle: RePEc:ukc:ukcedp:9905
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    Cited by:

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    2. Nabiddo, Winnie, 2007. "The analysis of money demand for Uganda (1986:1-2003:4)," Occasional Papers 54936, Economic Policy Research Centre (EPRC).
    3. Meyer Danie Francois & Chipeta Chama & Camel Richard Thabang Mc, 2018. "An Analysis of the Effectiveness of Interest Rates to Facilitate Price Stability and Economic Growth in South Africa," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 63(3), pages 68-90, December.
    4. Emmanuel Ziramba, 2007. "Demand For Money And Expenditure Components In South Africa: Assessment From Unrestricted Error‐Correction Models," South African Journal of Economics, Economic Society of South Africa, vol. 75(3), pages 412-424, September.
    5. Agya Atabani Adi & Joshua Sunday Riti, 2017. "Determination of Long and Short Run Demand for Money in the West African Monetary Zone (WAMZ) Countries: A Panel Analysis," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 2(2), pages 79-97, December.
    6. Sambulo Malumisa, 2015. "Structural Breaks, Stability and Demand for Money in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 7(5), pages 79-90.

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    More about this item

    Keywords

    Demand for Money; Stability; Cointegration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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