This study evaluates how BRICS financial cooperation—specifically through the New Development Bank (NDB) and Contingent Reserve Arrangement (CRA)—impacts exchange rate stability. Utilizing a multi-period difference-in-differences (DID) framework on 99 countries from 2004 to 2024, we find that institutionalized cooperation significantly reduces realized exchange rate volatility. This stabilizing effect operates by optimizing domestic credit structures to mitigate "original sin" and attracting resilient foreign direct investment (FDI). Furthermore, the policy's efficacy is amplified by robust foreign reserves and political stability, yet attenuated by high domestic inflation. These results underscore the importance of non-Western financial safety nets in enhancing the macroeconomic resilience of emerging markets against global financial cycle shocks.
Deng et al. (Sun,) studied this question.