Understanding BRICSIZATION through an economic geopolitical model

Abstract

This paper investigates a key objective of BRICS: the establishment of an alternative international currency as part of a broader de-dollarization strategy. This effort has gained urgency, primarily due to Russia’s need to bypass Western sanctions and China’s advancement of the Belt and Road Initiative (BRI). By applying the Morris Method, the study introduces the BRICSIZATION index—a quantitative panel index measuring the level of independence from the dollar among BRICS members from 2003 to 2022. In the analysis, inflation rates and the Geopolitical Risk Index (GPR) of BRICS founding members are used as independent variables within a Panel Random Effect OLS and GLS model. The findings reveal that the average BRICSIZATION index is over 72 % out of 100 %, indicating a significant degree of progress toward de-dollarization. Within the BRICS framework, the currencies of Brazil, China, and South Africa are strong candidates for a new currency basket, achieving an average index of 93 %. Meanwhile, the currencies of India and Russia, with an average index of 37 %, are identified as weaker contributors to the basket. The study also highlights that economic instability—whether from inflation or heightened geopolitical tensions (as indicated by a rising GPR)—tends to reduce the BRICSIZATION index. This suggests that macroeconomic policies like inflation targeting, along with strengthened international relations among countries aiming for reduced dollar dependence, are essential to achieving de-dollarization. This analysis underscores the potential and challenges of creating a new currency bloc independent of the dollar, reflecting both the strategic interests and vulnerabilities within BRICS.