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Assessing the impossible trinity principle in BRICS grouping

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  • Bonga-Bonga, Lumengo

Abstract

This paper makes a significant contribution to the literature on the policy trilemma by evaluating potential policy combinations that are relevant for the BRICS grouping within the context of the Impossible Trinity. Additionally, the paper introduces a new modeling approach for assessing the policy trilemma, based on establishing a boundary for the linear combination of variables related to the trilemma. The findings reveal that adopting a fixed exchange rate system presents considerable challenges for BRICS countries within the framework of the Impossible Trinity. Specifically, the results suggest that if BRICS countries opt for a fixed exchange rate system, they would likely have to forgo free capital flow. This loss of flexibility could be particularly detrimental, given their significant international influence and their role as major recipients of capital flows for trade and financial transactions.

Suggested Citation

  • Bonga-Bonga, Lumengo, 2024. "Assessing the impossible trinity principle in BRICS grouping," MPRA Paper 121839, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:121839
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    File URL: https://mpra.ub.uni-muenchen.de/121839/1/MPRA_paper_121839.pdf
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    References listed on IDEAS

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    1. Thuy Tien Ho & Thu Hoai Ho, 2018. "Operating the impossible trinity before and after the global financial crisis 2007-2008: evidence in Vietnam," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 11(1/2), pages 40-49.
    2. George Pantelopoulos, 2021. "Can Central Banks circumvent the impossible trinity within their operational frameworks? Theory and evidence," The World Economy, Wiley Blackwell, vol. 44(7), pages 2041-2075, July.
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    5. Pascal Xavier Gnagne & Lumengo Bonga-Bonga, 2020. "The Impact of Exchange Rate Volatility on the Security Markets in BRICS Economies," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(1), pages 21-50.
    6. Kabelo Collen Makhanya & Lumengo Bonga-Bonga & Mathias Mandla Manguzvane, 2024. "Examining the Dependence Structure Between Carry Trade and Equity Market Returns in BRICS Economies," International Economic Journal, Taylor & Francis Journals, vol. 38(2), pages 365-384, April.
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    Keywords

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    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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