INTRA-TRADE FLOWS AND EXCHANGE RATE VOLATILITY AMONG BRICS MEMBER COUNTRIES: A GRAVITY MODEL APPROACH

Abstract

The gravity model approach was used to examine intra-trade flows and exchange rate volatility among BRICS countries. The study discovered that GDP has a significant impact on intra-trade flows, whereas geographical distance and exchange rate volatility have a negative impact on intra-BRICS trade flows. According to the results of the gravity model, special attention should be paid to improving the exchange rate stability of each BRICS country's real GDP. The study recommended that policymakers in the BRICS countries craft macroeconomic policies that reduce exchange rate volatility while maintaining the level and pattern of trade openness. The BRICS economies should generally strengthen and restructure their domestic foreign exchange markets, as their absence acts as a roadblock in mitigating exchange rate risk.

Keywords

• intra-trade
• exchange rate
• volatility
• trade openness
• brics