Disclaimer: AFEA Working Papers describe research in progress by the author(s) that has been peerreviewed and forthcoming in scientific outlets. There is a tacit acknowledgement of anonymous referees for constructive suggestions and critiques that have helped improve the content and rigour of the study. Each research stands on its merit and the views expressed in AFEA Working Papers are those of the author(s) and do not necessarily represent the views of the AFEA, its Executive Board, or AFEA management.

This study investigates the stability of demand for money in the proposed Southern African Monetary Union (SAMU). The study uses annual data for the period 1981 to 2015 from ten countries making-up the Southern African Development Community (SADC). A standard function of demand for money is designed and estimated using a bounds testing approach to co-integration and error-correction modeling. 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.This study extends the debate in scholarly and policy circles on the feasibility of proposed African monetary unions.