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Modeling Exchange rate -interest rate differential nexus in BRICS: The role asymmetry and structural breaks

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  • Zainab Sani
  • Afees Adebare Salisu
  • Eucharia Onyia
  • Onyebuchi Anih
  • Lawrence Kanu

Abstract

This paper validates, with a linear model, the theoretical construction that specifies negative relationship between interest rate differential and exchange rate in the BRICS countries. Further probe with a nonlinear model reveals that exchange rate responds asymmetrically to interest rate differential in the countries. In all, we show that accounting for asymmetry and structural breaks enhance the relationship.

Suggested Citation

  • Zainab Sani & Afees Adebare Salisu & Eucharia Onyia & Onyebuchi Anih & Lawrence Kanu, 2020. "Modeling Exchange rate -interest rate differential nexus in BRICS: The role asymmetry and structural breaks," Economics and Business Letters, Oviedo University Press, vol. 9(2), pages 73-83.
    • Handle: RePEc:ove:journl:aid:14091
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/14091
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    Cited by:

    1. Salisu, Afees A. & Gupta, Rangan & Kim, Won Joong, 2022. "Exchange rate predictability with nine alternative models for BRICS countries," Journal of Macroeconomics, Elsevier, vol. 71(C).

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