Abstract

  


 



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


Daniela Federici


University of Cassino - Department of Economics

Giancarlo Gandolfo


Accademia dei Lincei; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
April 27, 2011

CESifo Working Paper Series No. 3420

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.

Number of Pages in PDF File: 24

Keywords: exchange rate, chaos, jerk equation, continuous time econometrics

JEL Classification: F310, F370, C490, C610

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Date posted: April 27, 2011  

Suggested Citation

Federici, Daniela and Gandolfo, Giancarlo, The Euro/Dollar Exchange Rate: Chaotic or Non-Chaotic? (April 27, 2011). CESifo Working Paper Series No. 3420. Available at SSRN: http://ssrn.com/abstract=1824229

Contact Information

Daniela Federici
University of Cassino - Department of Economics ( email )
Cassino
Italy
Giancarlo Gandolfo (Contact Author)
Accademia dei Lincei ( email )
Via della Lungara 10
Rome, 00165
Italy
HOME PAGE: http://gandolfo.org
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
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