Sanctioned and speculated: The currency crisis dilemma in BRICS nations

Abstract

This study examines the macroeconomic consequences of speculative currency attacks on BRICS economies–Brazil, Russia, India, China, and South Africa–against the backdrop of their strategic shift toward de-dollarization. Speculative attacks typically involve sudden and massive sell-offs of domestic currencies in favour of foreign currencies, most often the US dollar. These episodes are frequently triggered by external shocks such as international sanctions, trade disputes, or political instability, posing significant risks to monetary stability in emerging markets. To assess these dynamics, the study employs a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model, supported by autoregressive (AR) estimations using the Box–Jenkins methodology. The model incorporates key macroeconomic variables such as real Gross Domestic Product (GDP), inflation, investment, and exchange rates, and is calibrated using panel data from 2014 to 2023. The findings indicate that speculative attacks have asymmetric effects: they consistently reduce real economic variables–including output, capital, and consumption–while simultaneously elevating domestic price levels and causing temporary exchange rate appreciation. These disturbances erode monetary sovereignty and hinder BRICS countries’ collective efforts to reduce dependence on the US dollar. The study highlights importance of adopting managed floating exchange rate regimes and building resilient regional monetary frameworks to absorb external shocks and ensure macroeconomic stability amid global uncertainties. © 2025 Informa UK Limited, trading as Taylor & Francis Group.