ECONOMIC FEASIBILITY OF A BRICS MONETARY UNION

This paper attempts to assess the feasibility of monetary integration between the world's fastest growing economies today, namely China, Russia, Brazil, India, and South Africa (BRICS) by reviewing variables according to the classical optimum currency areas (OCA) framework and recent considerations. The proposition is that, with greater trade and financial cooperation between the BRICS through the Contingent Reserve Arrangement (CRA), New Development Bank (NDB), and Asian Infrastructure Investment Bank (AIIB), there should be greater multilateral economic and monetary interconnectedness in the long run. In addition, tighter monetary integration between the BRICS can be a potential strategic reaction to the financial instabilities originated in the financial centers of the West. Since China is the largest economy, it is designated as the monetary anchor country in the exercise. The examined period spans from 2000 to 2013, including the periods before and after the peak of the 2008-09 global financial crisis. While the findings are mixed, results suggest Brazil as the most feasible candidate to unify monetarily with China.