A Positive Lyapunov Exponent in Swedish Exchange Rates?

Mikael Bask ()

No 528, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: Can nominal exchange rates be characterized by deterministic chaos? To answer this question, a statistical framework utilizing a blockwise bootstrap procedure is used to test for the presence of a positive Lyapunov exponent in an observed stochastic time series (Bask and Gencay, 1998). Daily data for the Swedish Krona against the Deutsche Mark, the ECU, the U.S. Dollar and the Yen exchange rates are examined. In most cases, the null hypothesis that the exchange rate series is not generated by a chaotic dynamical system can be rejected and these results are consistent with the hypothesis that the exchange rate series may be characterized by deterministic chaos.

Keywords: Deterministic chaos; Exchange rates; Lyapunov exponents; Moving blocks bootstrap; Phase space reconstruction (search for similar items in EconPapers)
JEL-codes: C12 C14 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-ifn
Date: 2000-03-23
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Published in Chaos, Solitons and Fractals, 2002, pages 1295-1304.

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Persistent link: http://EconPapers.repec.org/RePEc:hhs:umnees:0528

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