DOI: 10.3897/brics-econ.6.e147499

Authors: Ivan Nosov

Abstract: The current state of international economic relations has intensified discussions surrounding various scenarios for financial convergence among the BRICS countries, including the potential adoption of a common currency or alternative means of payment. This paper explores the application of the C-means fuzzy clustering method to assess whether the economies of six BRICS countries — Brazil, Russia, India, China, South Africa, and Indonesia — exhibit homogeneity with respect to the criteria for an optimum currency area. To achieve this objective, the C-means fuzzy clustering model is applied to a set of economic indicators calculated for each BRICS member state and for a control group of non-BRICS economies, measured relative to those of a designated reference country. Each of the BRICS countries sequentially assumes the role of the reference country. The analysis focuses on how both BRICS and control countries are distributed among the resulting clusters. The findings indicate that the BRICS economies do not demonstrate homogeneity based on optimum currency area criteria because the largest economy in the group — the People’s Republic of China — frequently does not cluster with the other BRICS members. These results provide insights for ongoing discussions about the feasibility of a common BRICS currency by broadening the analytical framework and aiding policymakers in assessing the potential benefits, costs, and implications of deeper monetary integration within the group.

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