Co-movement Analysis of Foreign Exchange Reserve Volatility in BRICS Countries

Abstract

Foreign exchange reserves are an important component of a country's official reserve assets and an important indicator of a country's international liquidity. As representatives of emerging market countries and developing countries, the volatility of the foreign exchange reserves of the BRICS countries is crucial to the world. Studying whether there is volatility of foreign exchange reserves among the five countries is conducive to adjusting the direction of foreign exchange reserve management within the country, better exploring ways to promote the development of the foreign exchange reserve market, and is also of great significance to the future economic cooperation among the five countries. This study uses the correlation coefficient method, Granger causality test and cluster analysis to prove that there is indeed co-movement in the volatility of foreign exchange reserves among the BRICS countries.