Munich Personal RePEc Archive

Exchange rate misalignments and current accounts in BRICS countries

Rikhotso, Prayer and Bonga-Bonga, Lumengo (2021): Exchange rate misalignments and current accounts in BRICS countries.

[img]
Preview
PDF
MPRA_paper_107973.pdf

Download (284kB) | Preview

Abstract

This paper assesses the impact of misalignment on the current accounts of BRICS countries using the empirical approaches that address the issue of model uncertainty and asymmetry. The results of the empirical analysis empirical confirm that the relationship between misalignment and current account is asymmetric in that overvaluation of BRICS currencies deteriorate the current account and undervaluation does improve it. Moreover, the results of the empirical analysis advocate the use of real effective exchange rate as an effective macroeconomic policy instrument to enhance relative export competitiveness in BRICS. Further studies in this area should examine the impact of marginal propensity to import and how each country’s propensity to import affects the current balance given episodes of overvaluation and undervaluation.

Logo of the University Library LMU Munich
MPRA is a RePEc service hosted by
the University Library LMU Munich in Germany.