The Demand for Money in Selected SADC Countries: Structure, Policy and a Comparison with the ASEAN Countries

Abstract

The choice of nominal anchors has confounded policy makers the world over. Yet, conventional money demand functions have offered the easiest and the surest route for conducting monetary policy in pursuit of their central objective of inflation control. While considerable literature exists on the money demand functions in developed countries, the issue is still under-researched in relation to developing countries (see Arrau et al., 1995). In the case of African countries, monetary institutions are still maturing and several enabling legislative initiatives have recently been taken in this direction. Most countries have preferred to adopt the traditional route of monetary targeting which makes it necessary that we improve our understanding of the factors determining money demand.