Power Laws in Exchange Rate Fluctuations

Takashi Obara

Icfai University Journal of Applied Economics, 2008, vol. VII, issue 5, pages 7-14

Abstract: : This paper analyzes the daily time series of Japanese yen exchange rate against the US dollar by a model of stochastic differential equation whose coefficient oscillates cyclically. The expectation value and the variance of the series are derived by solving the equation. It is shown that their power spectrums are expressed by the power function, w–h, where w is the angular frequency and 1.9 < h < 2.6. It is also revealed that the power spectrum of the expectation value has two breaking points and that of the variance has one breaking point.

Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:icf:icfjae:v:07:y:2008:i:5:p:7-14

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