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Monetary policy and capital flow implications on economic growth in BRICS countries

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Abstract

This study investigates monetary policy and capital flow implications on economic growth in emerging economies so-called BRICS countries between 2001 and 2015. The causality results revealed a unidirectional causality from foreign direct investment and broad money to total reserves, real GDP per capita and broad money to total reserves, broad money to total reserves and real interest rates as a percentage, foreign direct investment and commercial bank and another lending, total changes in external debt stock and commercial bank and another lending, foreign direct investments and real interest rates as a percentage, foreign direct investment and domestic credit provided by the financial sector, and domestic credit provided by the financial sector and real GDP per capita. A bidirectional causality holds for domestic credit provided by the financial sector and broad money to total reserves, and real interest rates as a percentage and commercial bank and another lending. The results suggest that policies should include restrictions on capital flows, targeted monetary policy for both money supply and interest rates, an external debt ceiling, broadening financial regulations, and domestic institutional strengthening.

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Fig. 1

Source: World Bank [26]

Fig. 2

Source: World Bank [26], ‘D’ is a first difference operator

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Availability of data and material

The datasets used and/or analyzed during the current study are available from the corresponding author on reasonable request.

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Authors and Affiliations

  1. Faculty of Economics and Business Administration, Department of Economics, Cyprus West University, Salamis Road, Famagusta, North Cyprus, Cyprus

    Ergin Akalpler

  2. Near East University, FEAS, Yakin Doğu Bulvarı, Nicosia, North Cyprus, Cyprus

    Simbarashe Hove

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  1. Ergin Akalpler
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  2. Simbarashe Hove
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EA and SH wrote this paper, read and approved the final manuscript.

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Correspondence to Ergin Akalpler.

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Akalpler, E., Hove, S. Monetary policy and capital flow implications on economic growth in BRICS countries. IJEPS 16, 253–274 (2022). https://doi.org/10.1007/s42495-021-00076-z

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