Analyzing dynamics and forecasting real effective exchange rates for BRICS countries (1994-2016)

Fifthly, the research forecasts a long-term strengthening of currencies as a result of an increase in the efficiency of national economies and creation of the BRICS' financial infrastructure, with the New Development Bank ($100 bln capital) and Pool Contingent Reserve Arrangement ($100 bln startup capital), as well as an increase in the share of national currencies in mutual payments.

In the sixth, the representation of the BIS REER as a random process with a polynomial trend and a stochastic constituent of the Wiener type made it possible to make shortterm forecasts for the REER trajectories based on discrete approximation, with a nominal expected trajectory reflecting the REER dynamics and the actual values of the BRICS' currencies being within the bounds of the 30 % confidence band during the reference period.

Seventhly, the outcomes of the short-term forecast of the BIS REER dynamics depend significantly on the reference period and forecasting horizon.

Research limitation and direction for further research

Nominal and Real Exchange Rates are influenced by a large number of geo-economic and geopolitical factors, market structure, and policies of Forex participants. A complex analysis is the ideal form to consolidate authentic scientific results and estimations in future research.

Restrictions on the present research result from two different problems: the fundamental and the technical analysis. Solving these problems requires an analysis of indices over several time intervals.

The present study focused on the fundamental analysis. However, the significance of the research consists not only of analysis and synthesis of the phenomena, but also in forecasting REER, which was not an objective in this work, as it would require applying quite different tools: e.g. theories of casual processes, imitating methods of modeling, and so on.

The outcomes of forecasting short-term BIS REER dynamics for currencies of various countries using the polynomial residues model depend significantly on the choice of the reference period and the forecasting timeframe. The degree of the polynomial and the choice of the two reference periods for each currency are determined separately for each case.

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