From Boom to Bust: Modelling How Risk and Uncertainty Driver of BRICS Business Cycle Interdependence

In this study, we provide a comprehensive assessment of how geopolitical risk (GPR) and US economic policy uncertainty (US_EPU) influence the interdependence of business cycles among BRICS countries. Using a three-stage analytical approach, we uncover several key findings. First, we present strong evidence of time-varying and asymmetric interdependence among BRICS economies, with Russia and China acting as primary shock transmitters, while South Africa and India serve as major shock recipients. Second, we demonstrate that GPR and US_EPU play a predictive role in shaping BRICS business cycle interdependence, revealing a nonlinear relationship where their effects fluctuate across different levels of economic synchronisation. Third, we establish that the impact of these external shocks can be both stabilising and destabilising, depending on the intensity of uncertainty and the prevailing phase of the business cycle. These findings underscore the critical role of geopolitical and policy-driven uncertainties in influencing macroeconomic stability and financial market dynamics within the BRICS economies. Our study provides valuable insights for policymakers and market participants, emphasising the importance of proactive risk monitoring and coordinated economic strategies in mitigating uncertainty-induced disruptions.