Money demand, ARDL model, Cointegration, South Africa


This study estimates real intermediate money demand (RM2) and real broad money demand (RM3) for South Africa from 1990 Q1 to 2019 Q4. The main objective of the study was to explore the relationship between money demand and its determinants in South Africa with specific emphasis on the long-run relationship and stability between RM2, RM3,and their determinants. Auto-regressive Distributed Lag (ARDL) bound test for cointegration model developed by Pesaran (2001) was employed. The results found that both RM2 and RM3 are cointegrated with inflation rate, interest rate, exchange rate,real GDP, and credit to the private sector in South Africa. Credit to the private sector (PSC) showed significant and positive effects on the long-run RM2 and RM3 which implied the increased integration of South Africa to the global economy. Also, findings revealed that, both RM2 and RM3 are stable with their explanatory variables as shown by the results of the CUSUM test.Generally, the study lends support to the significance of RM3 as a monetary anchor for inflation targeting in South Africa. Although, the model for RM2 was found to be more significant and healthier than RM3. Thus, the study suggested fora reassessment of the monetary aggregates probably by incorporating foreign interest rates and stock prices in order to ascertain whether or not these results will still hold.

Author Bio

Ali Kole is a staff of the Polytechnic, Geidam, Yobe State.

Hassan N. Wali is a staff of Sule Lamido University, Kafin-Huasa

Alhassan M. Idris is a staff of Department of Economics, Kaduna State University, Kaduna.

Ismail H. Sanusi is a staff of Department of Economics, Ahmadu Bello University, Zaria

Publication Title








To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.