A study of the effectiveness of central bank intervention in BRICS countries

This paper examined the effectiveness of the intervention of the central bank and macroeconomic indicators with the exchange rates among BRICS countries. We found that foreign exchange intervention in Russia, India, and China can reduce exchange rate volatility; thereby, they may be presumed effective in reducing the exchange rate volatility. Interestingly, the intervention by the central bank of Brazil was found to be insignificant, and the central bank intervention in South Africa increased the exchange rate volatility. Based on these results, we conclude that the intervention of the central banks in Brazil and South Africa is ineffective in controlling volatility. The empirical results show that asymmetry in central bank intervention leads to the central bank's fears of appreciation rather than domestic currency depreciation. Moreover, there was the presence of the purchasing power parity theory in BRICS nations.