Conclusion
The results suggest that there is an overwhelming existence of cointegration among the equity markets of BRICS in the short as well as long run. There is only one cointegrated equation in the system which implies that cointegration among the equity markets does exist, although it is weak, and results of Granger causality test show that there is no causality among market pairs China–Brazil, Russia–Brazil, South Africa–Brazil, Russia– China, and South Africa–India. Therefore, the result reveals that even though the financial integration among the equity markets of BRICS is on an ascendance, still it is far from complete.
The article recommends for further relaxations of restrictions of capital account with a rider that full capital account convertibility should be preceded by strong macroeconomic policies, better institutions, and development of financial markets. It may be noted that the capital account is not fully opened up in any of the BRICS economies except for Russia. Harmonization of laws, regulations, and operations based on internationally acceptable norms, standards, and best practices that will facilitate greater cross-border transactions are also recommended. Appropriate regulatory supervision, however, needs to be ensured at every level so as to minimize the risks associated with the financial integration.
