Assessing the impossible trinity principle in BRICS grouping

Bonga-Bonga, Lumengo (2024): Assessing the impossible trinity principle in BRICS grouping.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: impossible trinity; exchange stability; monetary policy independence; BRICS.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance

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