Nominal and Real Stochastic Convergence of the BRICS Economies

This study sheds light on the real and nominal economic convergence and the time-varying convergence speed of Brazil, Russia, India, China, and South Africa (BRICS). This paper also employs panel data models and a Malmquist index to analyze the mechanism of real economic convergence. The study finds evidence of real convergence in monthly growth of output (industrial production) of the BRICS economies, where the speed of convergence increases in the post-crisis period. Economic convergence is also witnessed by physical capital per capita and total factor productivity (TFP). However, lack of monetary convergence is apparent in nominal interest rate spreads, monetary aggregate M2, and the price level. Although the BRICS economies are converging to a fully-fledged economic and trade union, such convergence is not echoed by their monetary aggregates and price levels. Finally, the evidence of technological progress is expected to promote labor productivity and to further accelerate economic convergence.