Monetary policy in the BRICS: Strategic basis and effectiveness

Abstract

This paper aims to specify the monetary policy in the BRICS (Brazil, Russia, India, China and South Africa) from the perspective of its strategic basis and effectiveness. Such analysis, performed on individual countries from this group, has indicated that, on the whole, they converge with the developed countries in terms of their monetary policy, thereby renouncing its accommodative orientation and exchange rate targeting in favour of direct inflation targeting as its strategic basis. Brazil and South Africa already use such targeting, whereas Russia intends to do so in 2015. China and India have been undertaking concrete steps in the same direction. The effectiveness of monetary policy in Brazil and South Africa has been satisfactory, having resulted in a somewhat higher inflation than the one considered to be balanced in developed countries. Such inflation also characterizes other BRICS, among which China implements the strategy of monetary aggregates targeting, with target values mostly being exceeded, whereas Russia and India resort to accommodative monetary policy, yet dominantly without its inter-target.

Keywords

• monetary policy
• BRICS
• direct inflation targeting
• exchange rate targeting