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The Threshold Effect of Exchange Rate on Economic Growth in Brazil, Russia, India, China and South Africa (BRICS) Countries

Author

Listed:
  • Molocwa Goitsemodimo Abel

    (University of Venda, Faculty of Management, Commerce and Law, Department of Extended Curriculum Programme, South Africa)

  • Choga Ireen

    (North-West University, Faculty of Economic and Management Science Department of Economic Sciences, South Africa)

Abstract

This article examines the threshold effect of exchange rates on economic growth in BRICS countries from 1994 - 2022. The paper employed the Panel Threshold regression (PTR) model to explore how exchange rate fluctuations influence economic growth across different regimes (lower regime or upper regime). The findings of this study confirm that economic growth exhibits a positive relationship with the exchange rate in the lower regime (EXCH 5.164) has a negative impact on growth. Moreover, when the exchange rate is beyond the threshold value in the upper regime, other control variables such as inflation rate, interest rate and trade openness negatively affect economic growth. These insights provide valuable guidance for BRICS nations and similar economic blocs in formulating more effective monetary and exchange rate policies and choosing the most appropriate exchange rate regime, which the New Development Bank can leverage to enhance economic stability and resilience. This study underscores the significant influence of exchange rates on economic growth in BRICS countries, providing valuable insights for policy-makers to refine strategies during excessive exchange rate appreciation. It is one of the few analyses employing the PTR to investigate the threshold effects of exchange rates on growth and the first to do so specifically within the BRICS context.

Suggested Citation

  • Molocwa Goitsemodimo Abel & Choga Ireen, 2025. "The Threshold Effect of Exchange Rate on Economic Growth in Brazil, Russia, India, China and South Africa (BRICS) Countries," Economics, Sciendo, vol. 13(3), pages 83-103.
    • Handle: RePEc:vrs:econom:v:13:y:2025:i:3:p:83-103:n:1005
    DOI: 10.2478/eoik-2025-0057
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    References listed on IDEAS

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    2. Guzman, Martin & Ocampo, Jose Antonio & Stiglitz, Joseph E., 2018. "Real exchange rate policies for economic development," World Development, Elsevier, vol. 110(C), pages 51-62.
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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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