Assessing the impossible trinity principle in BRICS grouping

Lumengo Bonga-Bonga

MPRA Paper from University Library of Munich, Germany

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.

Keywords: impossible trinity; exchange stability; monetary policy independence; BRICS. (search for similar items in EconPapers)
JEL-codes: C2 E61 F4 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cba, nep-cis, nep-ipr, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:121839

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