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

Ergin Akalpler () and Simbarashe Hove ()
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Ergin Akalpler: Cyprus West University
Simbarashe Hove: Near East University, FEAS

International Journal of Economic Policy Studies, 2022, vol. 16, issue 1, No 12, 253-274

Abstract: 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.

Keywords: Monetary policy; Capital flows; Causality; Fixed effects; BRICS; Fragility (search for similar items in EconPapers)
JEL-codes: E44 E52 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s42495-021-00076-z

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