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Has the dependence structure of the BRICS exchange rates changed after the financial crisis? Evidence from R-Vine copula model

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  • Zhuoqun Zhang
  • Tao Zhang

Abstract

Purpose - The authors examine the dependence structure of the BRICS exchange rates. Design/methodology/approach - The authors construct a regular vine copula model to study the co-movements of exchange rates in BRICS controlling the influences from the SDR currencies and the oil prices. Findings - The main findings show that, after the financial crisis, RMB pursued a more balanced strategy shifting from USD-centered to USD-EUR dependency and the oil prices become more dependent on RUB than USD, which could weaken the dollar hegemony. From robustness tests, we find that the inclusion of RMB in SDR has certain but limited impacts on the dependence structure and the influence of the GBP weakened as well. The results have important implications for currency trade, policy design and the future of the BRICS. Originality/value - The contribution of this paper is twofold. First, we examine the interdependence structure of the BRICS exchange rates controlling for the influence of SDR currencies and the oil prices with R-Vine copula model. Second, we compare the pre- and after-crisis structure and see if the financial crisis and the BRICS summits have changed the structure.

Suggested Citation

  • Zhuoqun Zhang & Tao Zhang, 2021. "Has the dependence structure of the BRICS exchange rates changed after the financial crisis? Evidence from R-Vine copula model," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(10), pages 2490-2509, March.
    • Handle: RePEc:eme:ijoemp:ijoem-06-2020-0717
    DOI: 10.1108/IJOEM-06-2020-0717
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    More about this item

    Keywords

    Exchange rates dependence structure; R-Vine copula; The BRICS; The global financial crisis; C32; F31; Q43;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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