EconStor >
Otto-Friedrich-Universität Bamberg >
Bamberg Economic Research Group, Universität Bamberg >
BERG Working Paper Series, Universität Bamberg >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/45551
  
Title:On the inherent instability of international financial markets: Natural nonlinear interactions between stock and foreign exchange markets PDF Logo
Authors:Dieci, Roberto
Westerhoff, Frank
Issue Date:2011
Series/Report no.:BERG working paper series on government and growth 79
Abstract:We develop a novel financial market model in which the stock markets of two countries are linked via and with the foreign exchange market. To be precise, there are domestic and foreign speculators in each of the two stock markets which rely either on linear technical or linear fundamental trading strategies to determine their orders. Since foreign stock market speculators require foreign currency to conduct their trades, all three markets are connected. Our setup entails a natural nonlinearity which may cause persistent endogenous price dynamics. Moreover, we analytically show that market interactions can destabilize the model's fundamental steady state.
Subjects:Stock prices
exchange rates
market stability
technical and fundamental analysis
nonlinear market interactions
endogenous dynamics
JEL:C63
F31
G12
G14
ISBN:978-3-931052-89-8
Document Type:Working Paper
Appears in Collections:BERG Working Paper Series, Universität Bamberg

Files in This Item:
File Description SizeFormat
658138065.pdf378.41 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/45551

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.