Abstract
This research applies an ordinary GARCH (1, 1) model, as well as a quantile regression technique to analyse the effects of contagion among BRICS economies. To this end, data on Brazilian, Russian, Indian, Chinese, and South African deposit and lending rates are estimated to test if contagion exists between these economies. Monthly periods are used for the estimations, ranging from April 1999 to June 2018. The study focuses on a dependence structure among the variables by investigating seven quantiles to detect possible contagion effects. The results indicate that China induces asymmetric dependence towards its BRICS counterparts, namely Brazil, Russia and India, but does not affect South Africa’s interest rates. However, the latter are asymmetrically dependent on the Russia and Brazil interest rates. This study is therefore not entirely supportive of BRICS interest rates contagion. The study findings should be of importance to international investors exploring portfolio diversification, and to the policymakers of the BRICS countries who may be seeking monetary policy implementation and capital market liberalization.
M.Com. (Financial Economics)