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The effects of interest rates on the BRICS exchange rate: a 2SLS approach

Author

Listed:
  • Marco A Kerbeg

    (Bank of Brazil)

  • Mathias S Tessmann

    (Brazilian Institute of Education, Development and Research - IDP)

  • Gustavo C Haase

    (Bank of Brazil)

  • Thiago T Lourenço

    (Bank of Brazil)

Abstract

This study explores the impact of interest rates on the exchange rates of the BRICS nations—Brazil, Russia, India, China, and South Africa. By incorporating control variables such as inflation and broad money supply, this analysis employs Granger causality tests to detect potential endogeneity and estimates a Two-Stage Least Squares (2SLS) model using panel data. The findings reveal that interest rates significantly influence exchange rates in these countries, emphasizing their importance in the formulation of effective monetary policies.

Suggested Citation

  • Marco A Kerbeg & Mathias S Tessmann & Gustavo C Haase & Thiago T Lourenço, 2025. "The effects of interest rates on the BRICS exchange rate: a 2SLS approach," Economics Bulletin, AccessEcon, vol. 45(1), pages 237-242.
    • Handle: RePEc:ebl:ecbull:eb-24-00248
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    More about this item

    Keywords

    BRICS; Exchange Rate; Interest Rate; Inflation; Monetary Offer; 2SLS.;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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