Comovement and Causal relationship between select Macroeconomic indicators and Exchange Rates of BRICS Countries

Abstract

Exchange Rates plays a vital role in the economy. It is important to manage the risk newlineof currency fluctuations in the global market. Exchange Rate is one of the important tools newlinewhich affects the country s economic situation, financial stability, and social welfare. newlineExchange Rate variable is not a constant variable, it always fluctuates due to some newlineeconomic, political and social factors, these fluctuations influence on macroeconomic newlineindicators such as GDP, Inflation, Balance of payments, Interest rates etc. Macroeconomic newlineindicators are unstable and volatile depending on the state of the economy. Macroeconomic newlineaspects include the performance of the country, its behavior, and the decision taken related newlineto the economy of the country. BRICS countries, namely Brazil, Russia, India, China, and newlineSouth Africa, are playing an increasingly important role on the global stage amid a slow newlinerecovery of the world economy. Increased globalization has meant that BRICS has become newlinean important source of global growth and political influence. Financial markets in the newlineBRICS Countries have similarly expanded in a rapid manner. Brazil, Russia, India, China newlineand South Africa (BRICS) are the leading budding economies and political powers at the newlineregional and international level. The first specialist who has approached the influence of newlinemarket size and power upon the country s trade was Adam Smith1 (1776). In his study trade newlineis characterized by high economic growth, economic potential, and demographic newlinedevelopment and is increasingly becoming significant sources of power in the global world newlineorder. Clyde Prestowitz4 (2008) observed in his study that in globalization era almost three newlinemillion people from emerging countries such as China, India, Russia, and Brazil have newlinemanaged to integrate into the global market. BRICS is a unique informal alliance whose newlineagenda stands nascent and flexible. BRICS economies have grown at a rapid pace and are newlinebecoming increasingly more integrated with the most advanced economies in terms of trade newlineand investment. BRICS (