Currency without credibility: why BRICS de-dollarization falls short?

Abstract

Purpose The pursuit of de-dollarization by BRICS, including Brazil, Russia, India, Chin and South Africa, though indirect, represents a development of growing global relevance in the evolving international monetary order. This study explores the stability of BRICS currencies within this broader context, emphasizing the bloc’s recent symbolic initiative to issue a common banknote. It advances optimal currency area (OCA) theory by integrating macroeconomic and institutional dimensions to assess the viability of a new currency framework. Design/methodology/approach This paper introduces the Currency Clear Condition Index (CCCI), which combines BRICS national currencies and sanction data using the Morris method. A panel vector autoregressive model is then applied to assess the effects of real gross domestic product (GDP), political stability (PS) and logistical shocks on the CCCI, drawing on data from 2010 to 2023. Findings Results show that Russia has exhibited the highest CCCI values since 2013, reflecting elevated exchange rate volatility and persistent sanctions. Impulse response analysis reveals that a 1% increase in the Logistics Performance Index raises the CCCI by nearly 2% for about 2.5 years, while a 1% improvement in PS reduces it by approximately 2.5% for 1.5 years. A 1% increase in GDP lowers the index by around 0.5% over 2.5 years. These findings indicate that BRICS de-dollarization depends more on macroeconomic strength and institutional stability than on logistical or symbolic actions. Research limitations/implications The analysis is confined to the 2010–2023 period and may not fully capture post-2023 developments. Future studies could refine the CCCI and evaluate its applicability to other regional blocs pursuing currency cooperation. Practical implications The analysis is limited to the 2010–2023 period and may not capture emerging dynamics post-2023. Future research can refine the CCCI and examine its applicability to other regional blocs. Originality/value The study broadens OCA theory by incorporating political and logistical asymmetries and introduces the CCCI as a novel metric for assessing currency-clearing feasibility under sanctions and financial fragmentation.