Bubbling and Crashing Exchange Rates

Marianna Grimaldi and Paul De Grauwe

No 1045, CESifo Working Paper Series from CESifo

Abstract: We develop a simple model of the foreign exchange market in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one.This model produces two kinds of equilibria, a fundamental and a bubble one. In a stochastic environment the model generates a complex dynamics in which bubbles and crashes occur at unpredictable moments. We also analyse the empirical relevance of the model.

Date: 2003
New Economics Papers: this item is included in nep-fmk and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp1045.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1045

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().