Competitions hatch butterfly attractors in foreign exchange markets

Yu Ying Jin

Physica A: Statistical Mechanics and its Applications, 2005, vol. 348, issue C, 380-388

Abstract: Chaos in foreign exchange markets is a common issue of concern in the study of economic dynamics. In this work, we mainly investigate the competition effect on chaos in foreign exchange markets. As one of the main economic structures in the globalization process, competition between two target exchange rates with the same base currency forms a simple competitive exchange rate relation, where each exchange rate follows the chaotic model of De Grauwe (Exchange Rate Theory-Chaotic Models of Foreign Exchange Markets, Blackwell, Oxford, Cambridge, MA, 1993). The main discovery is, while each exchange rate is in its non-chaotic parameter regions, the effect of competition will “hatch” butterfly-like chaotic attractors in the competitive market. The positive Lyapunov exponent in the market explains the reason why chaos occurs.

Keywords: Competition; Chaos; Exchange rates; Globalization; Economic dynamics (search for similar items in EconPapers)
Date: 2005
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:348:y:2005:i:c:p:380-388

DOI: 10.1016/j.physa.2004.09.025

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