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Currency Misalignments in the BRIICS Countries: Fixed Vs. Floating Exchange Rates

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  • Nikolaos Giannellis

    (University of Crete)

  • Minoas Koukouritakis

    (University of Crete)

Abstract

In the present paper we attempt to investigate whether the real effective exchange rates of the BRIICS countries, namely Brazil, Russia, India, Indonesia, China and South Africa, converge or not to their equilibrium levels. Our analysis is based on the use of an external balance model as well as the implementation of recent panel cointegration techniques. Our evidence indicates the existence of a valid long-run relationship between the real effective exchange rate, the net foreign assets, the GDP differential and the real interest rate differential for each of the six countries of our sample. Furthermore, our empirical results imply that after the adoption of a free floating exchange rate regime by Brazil, Russia, India, Indonesia and South Africa and the liberalisation of the Chinese exchange rate policy that took place during the last decade, currency misalignments have been gradually reduced, leading the real effective exchange rates of the respective currencies very close to their equilibrium levels.

Suggested Citation

  • Nikolaos Giannellis & Minoas Koukouritakis, 2018. "Currency Misalignments in the BRIICS Countries: Fixed Vs. Floating Exchange Rates," Open Economies Review, Springer, vol. 29(5), pages 1123-1151, November.
  • Handle: RePEc:kap:openec:v:29:y:2018:i:5:d:10.1007_s11079-018-9477-0
    DOI: 10.1007/s11079-018-9477-0
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    5. Iqbal, Javed & Mahmood, Fatima & Nosheen, Misbah & Wohar, Mark, 2023. "The asymmetric impact of exchange rate misalignment on economic growth of India: An application of Hodrick–Prescott filter technique," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 809-823.
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    7. Yin-Wong Cheung & Shi He, 2019. "Truths and Myths About RMB Misalignment: A Meta-analysis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(3), pages 464-492, September.

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    More about this item

    Keywords

    BRIICS; External balance model; Panel cointegration; Misalignment rate; Fixed vs. floating exchange rates;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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