In this paper we analyze the stability of the money demand system in the US. To this aim, we develop an estimation and testing framework for a threshold vector error-correction model (VECM), where short-run dynamics are regime dependent and are driven by an exogenous, stationary and ergodic threshold variable. We modify a traditional Wald-type test for linearity and derive its asymptotic distribution, which turns out to be non-standard, but similar to the one proposed by Andrews [Andrews, D. 1993. “Tests for Parameter Instability and Structural Change with Unknown Change Point.”