Inflation Convergence and the Prospect of a Common Currency in BRICS Countries: An Empirical Approach

Öz

According to the theory of optimum currency areas, one of the fundamental prerequisites for the adoption of a common currency within an economic union is the convergence of inflation rates among the member states. The primary objective of this study is to examine the presence of inflation convergence among BRICS countries in the context of a potential common currency initiative. For this purpose, the stationarity of twelve-month inflation series, determined at a monthly frequency for the countries of Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and Saudi Arabia, was analyzed over the period 2012:M1 to 2024:M10 using panel unit root tests. In the empirical analysis, the PANICCA test, which accounts for cross-sectional dependence, and the Fourier Panel KPSS test, which captures both abrupt and smooth structural breaks, were employed. The empirical findings indicate the existence of inflation convergence among the countries studied. In this regard, it may be asserted that one of the necessary conditions for the formation of a common currency among these countries is met. Nevertheless, significant differences in the economic structures, trade patterns, and political systems of the member states, as well as potential concerns regarding national sovereignty, suggest that the likelihood of BRICS establishing a common currency remains limited.

Anahtar Kelimeler

• Inflation Convergence
• Common Currency
• BRICS
• Panel Unit Root Test.

BRICS Ülkelerinde Enflasyon Yakınsaması ve Ortak Para Olasılığı: Ampirik Bir Yaklaşım

Öz

Optimum para alanı teorisine göre, bir ekonomik birlikte ortak para birimi kullanmanın gerekli ön koşullarından biri söz konusu ülkeler arasında enflasyon yakınsamasıdır. Bu çalışmanın amacı, ortak para yaratma olasılığı doğrultusunda BRICS ülkeleri arasında enflasyon yakınsamasının varlığını araştırmaktır. Bu amaçla, söz konusu ülke grubunda yer alan Brezilya, Rusya, Hindistan, Çin, Güney Afrika, İran, Mısır, Etiyopya ve Suudi Arabistan’a ait aylık frekansta belirlenen on iki aylık enflasyon serilerinin durağanlığı 2012:M1-2024:M10 dönemi için panel birim kök testleri ile araştırılmıştır. Araştırmada, ülkeler arasındaki yatay kesit bağımlılığını dikkate alan PANICCA testi ile ani ve yumuşak kırılmaları dikkate alan Fourier Panel KPSS panel birim kök testi kullanılmıştır. Bulgulara göre, söz konusu ülkeler arasında enflasyon yakınsaması vardır. Bu bağlamda, söz konusu ülkelerin ortak para yaratmasının ön koşullarından birinin gerçekleştiği ifade etmek mümkündür. Ancak, ülkelerinin ekonomik ve ticari yapıları ve politik sistemleri farklılıklar ve ortak paranın egemenlik kaygılarına yol açması gibi nedenlerden dolayı BRICS’in ortak para yaratma olasılığının düşük olduğu ifade edilebilir.

Anahtar Kelimeler

• Enflasyon Yakınsaması
• Ortak Para
• BRICS
• Panel Birim Kök Testi.

Kaynakça

1. Anoruo, E., ve Murthy, V. N. R. (2014). Testing nonlinear inflation convergence for the Central African Economic and Monetary Community. International Journal of Economics and Financial Issues, 4(1), 1-7.
2. Arestis, P., Chortareas, G., Magkonis, G. ve Moschos, D. (2014). Inflation targeting and inflation convergence: International evidence. Journal of International Financial Markets, Institutions and Money, 31, 285-295.
3. Bahmani-Oskooee, M., Chang, T., ve Wu, T. (2014). Revisiting purchasing power parity in African countries: Panel stationary test with sharp and smooth breaks. Applied Financial Economics, 24(22), 1429-1438.
4. Bai, J., ve Ng, S. (2004). A panic attack on unit roots and cointegration. Econometrica, 72(4), 1127-1178.
5. Bai, J., ve Ng, S. (2010). Panel unit root tests with cross-section dependence: A further investigation. Econometric Theory, 26(4), 1088-1114.
6. Bai, J., ve Perron, P. (1998). Estimating and testing linear models with multiple structural changes. Econometrica, 66(1), 47-78.
7. Baltagi, B. H., Feng, Q., ve Kao, C. (2012). A Lagrange multiplier test for cross-sectional dependence in a fixed effects panel data model. Journal of Econometrics, 170(1), 164-177.
8. Becker, R., Enders, W., ve Hurn, S. (2004). A general test for time dependence in parameters. Journal of Applied Econometrics, 19(7), 899-906.

9. Becker, R., Enders, W., ve Lee, J. (2006). A stationarity test in the presence of an unknown number of smooth breaks. Journal of Time Series Analysis, 27(3), 381-409.
10. Belliler, İ. S., ve Demiralp, A. (2024). G-20 ülkelerinde enflasyon yakınsaması: Panel birim kök testinden kanıtlar. Ardahan Üniversitesi İİBF Dergisi, 6(1), 40-47.
11. Breusch, T. S., ve Pagan, A. R. (1980). The Lagrange multiplier test and its application to model specifications in econometrics. Review of Economic Studies, 47(1), 239-253.
12. Brož, V., ve Kočenda, E. (2018). Dynamics and factors of inflation convergence in the European Union. Journal of International Money and Finance, 86, 93-111.
13. Carrion-i Silvestre, J. L., Del Barrio-Castro, T., ve López-Bazo, E. (2005). Breaking the panels: An application to the gdp per capita. The Econometrics Journal, 8(2), 159-175.
14. Cuestas, J. C., Gil-Alana, L. A. ve Taylor, K. (2016). Inflation convergence in Central and Eastern Europe vs. the Eurozone: Non-linearities and long memory. Scottish Journal of Political Economy, 63(5), 519-538.
15. Das, S. ve Bhattacharya, K. (2008). Price convergence across regions in India. Empirical Economics, 34(2), 299-313.
16. Enders, W., ve Holt, M. T. (2012). Sharp breaks or smooth shifts? An investigation of the evolution of primary commodity prices. American Journal of Agricultural Economics, 94(3), 659-673.
17. Gallant, A. R. (1981). On the bias in flexible functional forms and an essentially unbiased form. Journal of Econometrics, 15(2), 211-245.
18. Giannellis, N. (2013). Asymmetric behavior of inflation differentials in the Euro area: Evidence from a threshold unit root test. Research in Economics, 67(2), 133-144.
19. Girgin, M. (2023). Gelişmekte olan ülkelerde enflasyon yakınsaması: Yakınsama kulüpleri analizi (Yayımlanmamış Yüksek Lisans Tezi). Pamukkale Üniversitesi: Denizli.
20. Göktaş, Ö. (2024). Inflation convergence in fragile five countries: Evidence from RALS-LM unit root tests. Eurasian Econometrics, Statistics and Empirical Economics Journal, 25(25), 1-11.
21. Güriş, S., Çağlayan Akay, E. ve Bülbül, H. (2020). Enflasyon yakınsamasının fourier birim kök testleri ile incelenmesi: Kırılgan beşli örneği. Sosyal Bilimler Araştırma Dergisi, 9(3), 85-92.
22. Hadri, K. (2000). Testing for stationarity in heterogeneous panel data. Econometrics Journal, 3(2), 148-161.
23. Hepsağ, A. (2017). Inflation convergence among the next eleven economies: Evidence from asymmetric nonlinear unit root test. Theoretical and Applied Economics, 24(4), 43-52.
24. Holmes, M. J. (2002). Panel data evidence on inflation convergence in the European Union. Applied Economics Letters, 9(3), 155-158.
25. Hyvonen, M. (2004). Inflation convergence across countries. Economic Research Department Reserve Bank of Australia Research Discussion Paper. 2004-04.
26. Islam, N. (1995). Growth empirics: A panel data approach. The Quarterly Journal of Economics, 110(4), 1127-1170.
27. Karademir, C. (2022). Seçili AB ülkelerinde enflasyon oranı yakınsaması analizi: Nahar-Inder tekniğinden kanıtlar. Üçüncü Sektör Sosyal Ekonomi Dergisi, 57(4), 3030-3041.
28. Kisswani, K. M., ve Nusair, S. A. (2014). Nonlinear convergence in Asian interest and inflation rates: Evidence from Asian countries. Economic Change and Restructuring, 47(3), 155-186.
29. Kočenda, E., ve Papell, D. H. (1997). Inflation convergence within the European Union: A panel data analysis. International Journal of Finance and Economics, 2(3), 189-198.
30. Kwiatkowski, D., Phillips, P. C. B., Schmidt, P., ve Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics, 54(1-3), 159-178.
31. Liontakis, A., ve Kremmydas, D. (2014). Food inflation in the European Union: Distribution analysis and spatial effects. Geographical Analysis, 46(2), 148-164.
32. Liu, T. Y., ve Lee, C. C. (2021). Global convergence of inflation rates. The North American Journal of Economics and Finance, 58, 101501, 1-13
33. Lopez, C., ve Papell, D. H. (2012). Convergence of Euro Area inflation rates. Journal of International Money and Finance, 31(6), 1440-1458.
34. Maddala, G. S., ve Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, Special Issue, 631-652.
35. Mentz, M., ve Sebastian, S. P. (2003). Inflation convergence after the introduction of the Euro. Goethe University Frankfurt CFS Working Paper, 2003-30.
36. Mundell, R. A. (1961). A theory of optimal currency areas. American Economic Review, 51(4), 657-665.
37. Özmen, M., ve Baktemur, F. İ. (2015). Enflasyon yakınsamasının mekansal ekonometrik analizi. Sosyal Bilimler Araştırma Dergisi, 4(2), 187-194.
38. Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. CESifo Working Paper Series, 1229.
39. Pesaran, M. H., Ullah, A., ve Yamagata, T. (2008). A bias-adjusted LM test of error cross-section independence. Econometrics Journal, 11(1), 105-127.
40. Reese, S. ve Westerlund, J. (2016). Panicca: Panic on cross‐section averages. Journal of Applied Econometrics, 31(6), 961-981.
41. Romer, P. M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002-1037.
42. Quah, D. T. (1996). Twin peaks: Growth and convergence in models of distribution dynamics. The Economic Journal, 106(437), 1045-1055.
43. Siklos, P. L., ve Wohar, M. E. (1997). Convergence in interest rates and inflation rates across countries and over time. Review of International Economics, 5(1), 129-141.
44. Solow, R. M. (1956). A Contribution to the theory of economic growth. Quarterly Journal of Economics, 70(1), 65-94.
45. Spiru, A. M. (2008). Inflation convergence in Central and Eastern European economies. Romanian Economic and Business Review, 3(4), 14-34.
46. Temiz, M., ve Konat, G. (2019). Euro Bölgesi ülkeleri için enflasyon yakınsamasının panel birim kök testi ile incelenmesi. İşletme Araştırmaları Dergisi, 11(3), 2333-2337.
47. Tıraşoğlu, M., ve Yurttagüler, İ. M. (2018). BRICS ülkelerinde enflasyon yakınsaması: Kapsamlı bir birim kök testi analizi. Alphanumeric Journal, 6(2), 311-324.
48. Tinbergen, J. (1961). Do communist and free economies show a converging pattern?. Soviet Studies, 12(4), 333-341.
49. Tsafa-Karakatsanidou, M., ve Fountas, S. (2018). Testing for inflation convergence among European Union countries: A Panel Approach. Applied Economics Quarterly, 64(1), 17-37.
50. Tugcu, C. T., ve Tiwari, A. K. (2016). Does renewable and/or non-renewable energy consumption matter for total factor productivity (TFP) growth? Evidence from the BRICS. Renewable and Sustainable Energy Reviews, 65, 610-616.
51. Valera, M. L. G., ve Valera, H. G. (2014). Testing the inflation convergence among the original ASEAN members. Journal of Global Business and Trade, 10(2), 71-78.
52. Weber, A. A., ve Beck, G. W. (2005). Inflation rate dispersion and convergence in monetary and economic unions: Lessons for the ECB. Goethe University Frankfurt CFS Working Paper, 2005/31.
53. Westbrook, J. R. (1998). Monetary integration, inflation convergence and output shocks in the European monetary system. Economic Inquiry, 36(1), 138-144.
54. Yilmazkuday, H. (2022). Inflation convergence over time: Sector-level evidence within Europe. International Finance, 25(2), 183-217.