Long swings and chaos in the exchange rate in a DSGE model with a Taylor rule

Mikael Bask

No 19/2007, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: A DSGE model with a Taylor rule is augmented with an evolutionary switching between technical and fundamental analyses in currency trade, where the fractions of these trading tools are determined within the model. Then, a shock hits the economy. As a result, chaotic dynamics and long swings may occur in the exchange rate, which are appealing features of the model given existing empirical evidence on chaos and long swings in exchange rate fluctuations.

Keywords: chaotic dynamics; foreign exchange; fundamental analysis; monetary policy; technical analysis (search for similar items in EconPapers)
JEL-codes: C65 E32 E44 E52 F31 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2007_019

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