The aim of this paper is to develop a continuous time exchange rate model that allows for heterogeneity of the agents’ beliefs, in order to explore non-linearities and possible chaotic behavior. The theoretical model contains an intrinsic non-linearity that gives rise to a jerk differential equation, which is in principle capable of generating chaos. The model is econometrically estimated in continuous time with Euro/Dollar data and examined for the possible presence of chaotic motion. Our results indicate that the possibility of chaotic dynamics in our model is rejected.
The Euro/Dollar exchange rate: Chaotic or non-chaotic? A continuous time model with heterogeneous beliefs
FEDERICI, Daniela;
2012-01-01
Abstract
The aim of this paper is to develop a continuous time exchange rate model that allows for heterogeneity of the agents’ beliefs, in order to explore non-linearities and possible chaotic behavior. The theoretical model contains an intrinsic non-linearity that gives rise to a jerk differential equation, which is in principle capable of generating chaos. The model is econometrically estimated in continuous time with Euro/Dollar data and examined for the possible presence of chaotic motion. Our results indicate that the possibility of chaotic dynamics in our model is rejected.File in questo prodotto:
Non ci sono file associati a questo prodotto.
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
