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An Impact of BRICS on the Global Cycle

Priority areas of development: economics
2015
The project has been carried out as part of the HSE Program of Fundamental Studies.

The goal of the research is to reveal the impact of BRICS to the process of forming the global economic conjuncture. 

Following tasks to accomplish are implied by the goal: the analysis of the contribution of BRICS into global trade and global capital flows; the analysis of the BRICS position in the global manufacturing and consumption of the main industrial goods; estimation of the specific labor costs in BRICS and its impact on global economy growth rates; estimation “BRICS factor” within global and Russian economic conjuncture forecasting.

Methodology: statistical data analysis, implementation of econometric models

Empirical base of research: open data sources provided by Russian and global statistic services (UNO, IMF, Federal state Statistics Service, Bank of Russia, etc.)

Results of research: information on economic growth rates and external trade volumes in BRICS was systematized. The research shows that up to the present time economic growth in the countries of the BRICS group exceeded the global economic growth by 4-4,5% year-over-year, mainly due to the growth of China and India. But since 2010 growth rates of BRICS economies lowered, and Russia, Brazil and South Africa began to stagnate or even moved into a recession, due to structural problems. External trade growth rates are enough high in BRICS countries, although trade flows within the BRICS group are not significant. China is the only BRICS member which has intensive trade relations with other BRICS countries. The rest of the external trade partners of BRICS members are outside the group, which can be explained with not only geographic but also economic and cultural “remoteness” (the absence of complementarity in economic structures, mental differences, etc.). Political relations of BRICS members are intensively developing in conditions of fast growth of the economic influence of the group. During last 10 years the group became a political formation consisting of countries which are regional leaders  tending to save and intensify their influence within the global economy, to contrast with  traditional global economic leaders, first of all such as USA and EU. The strong global economic and political position of China can entail controversies inside of the BRICS group due to possible influence conflicts. The present research pays special attention to the Marshall-Lerner condition fulfilment (an exchange rate devaluation or depreciation will only cause a balance of trade improvement if the absolute sum of the long-term export and import demand elasticities is greater than unity). There is a hypothesis that economic growth in countries of the BRICS group can be a growth function of RULC (relative unit labor costs) and global demand. In other words, the effect of growing RULC on exports can be positive (Kaldor paradox). This assumption is usually made for developed countries; for developing countries the character of ULC influence on exports and imports was unknown. In the present research this problem is investigated with reference to BRICS members, econometric methods are used to estimate exports and imports elasticity to prices (real exchange rate) and to demand as a control variable (global GDP or GDP of certain countries) in 1980-2014 years. The research also estimated potential contribution of BRICS into the global GDP dynamics.

Level of implementation,  recommendations on implementation or outcomes of the implementation of the results: informational, expert and analytical support of the Government and the Bank of Russia within economics and economic policy matters.

 

Publications:


Smirnov S. V. Economic Fluctuations in Russia (from the late 1920s to 2015) // Russian Journal of Economics. 2015. Vol. 1. No. 2. P. 130-153. doi
Smirnov S. V., Kondrashov N. V., Petronevich A. Dating Cyclical Turning Points for Russia: Formal Methods and Informal Choices / NRU Higher School of Economics. Series EC "Economics". 2016. No. 122.
Смирнов С. В., Кондрашов Н. В., Петроневич А. В. Поворотные точки российского экономического цикла, 1981-2015 гг. // Экономический журнал Высшей школы экономики. 2015. Т. 19. № 4. С. 534-553.