The Causality Relationship Among Global Competitiveness, GDP Per Capita, and Exchange Rate Volatility in BRICS+ Countries, 2012–2024

Journal: Economics, Business, Management, & Accounting Journal (Ebisma)

Publication: 2026-09-25

DOI: 10.61083/ebisma.v6i3.313

Abstract

This study examines the long-run relationship and short-run causality among global competitiveness, proxied by the Global Innovation Index (GII), GDP per capita (PPP), and real effective exchange rate volatility (REER_VOL) in nine BRICS+ countries over the period 2012–2024. The study is motivated by mixed empirical evidence on the linkages between innovation, economic growth, and exchange rate stability in developing economies. Using annual panel data, the analysis applies the Panel Autoregressive Distributed Lag (Panel ARDL) approach with Pooled Mean Group (PMG) and Mean Group (MG) estimators, complemented by the Dumitrescu-Hurlin panel Granger causality test to identify short-run predictive directions. Data processing was carried out in EViews and cross-checked in Stata for robustness. The results show only one significant long-run relationship, namely a negative effect of GDP per capita on exchange rate volatility. The Error Correction Terms are negative and significant in all three equations, confirming adjustment toward long-run equilibrium even though most individual long-run coefficients are not significant. The Dumitrescu-Hurlin test finds no evidence of short-run Granger causality in any of the six tested directions. These findings indicate that exchange rate stability in BRICS+ countries is shaped more by fundamental income levels than by short-run dynamics among the three variables. Policymakers are encouraged to prioritize long-run economic capacity building to support currency stability, while future research should extend the observation period and incorporate moderating or mediating variables.