The Euro/Dollar Exchange Rate: Chaotic or Non-Chaotic?

Daniela Federici and Giancarlo Gandolfo

No 3420, CESifo Working Paper Series from CESifo

Abstract: The aim of this paper is to develop a continuous time exchange rate model that allows for heterogeneity of the agents’ beliefs, in order to explore non-linearities and possible chaotic behaviour. The theoretical model contains an intrinsic non-linearity that gives rise to a jerk differential equation, which is in principle capable of generating chaos. The model is econometrically estimated in continuous time with Euro/Dollar data and examined for the possible presence of chaotic motion. Our results indicate that the possibility of chaotic dynamics has to be rejected.

Keywords: exchange rate; chaos; jerk equation; continuous time econometrics (search for similar items in EconPapers)
JEL-codes: C49 C61 F31 F37 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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Working Paper: The Euro/Dollar Exchange Rate: Chaotic or Non-Chaotic? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3420

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