This study aims to assess whether BRICS+ currencies are sufficiently interconnected to reduce their sensitivity to external shocks, thereby enabling prospects for future de-dollarization. It explores how currency shocks within the BRICS+ bloc influence one another during periods of crisis, identifying which currencies consistently act as sources or absorbers of economic stress. Through this analysis, the study evaluates the inherent stability and shock-resilience of individual BRICS+ currencies.
This study examines the interconnectedness of daily returns and volatility among BRICS+ currencies, exploring their responses during the Global Financial Crisis (GFC) and COVID-19 crisis through a time-varying parameter vector autoregression (TVP-VAR) approach by Antonakakis et al. (2020).
Understanding these spillover effects is critical due to the significant global economic influence and diverse structures of BRICS+ economies. Notably, the Brazilian Real (BRL) and South African Rand (ZAR) frequently emerge as net transmitters, particularly during the GFC and COVID-19 crises, signaling their role as dominant economic influencers. Conversely, currencies such as the Chinese Yuan (CNY) and UAE Dirham (AED) predominantly act as net receivers, suggesting a relative vulnerability to external shocks. This study addresses the broader implications for enhancing economic resilience, informing policy and mitigating financial contagion among economies with varied structures and significant global influence. The findings indicate that volatility primarily drives spillovers during the GFC, while returns play a more dominant role during the COVID-19 crisis. The ZAR emerges as a consistent transmitter of shocks. At the same time, the AED largely remains a shock receiver despite the UAE’s role as a global business hub.
BRICS+ can transform global currency dynamics; hence, these pattern sheds light on key economic relationships, such as those between oil-trading partners like India, Russia and Iran, and highlight how currency interactions may shape strategic economic decisions. These insights are invaluable for policymakers, regulators and investors aiming to navigate risks effectively during financial uncertainty. Regulators’ understanding of the direction and intensity of risks in BRICS+ countries enables the use of policy tools to promote regional and international policy coordination and reduce the likelihood of severe risks in the future.
