Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/46414
Authors: 
Federici, Daniela
Gandolfo, Giancarlo
Year of Publication: 
2011
Series/Report no.: 
CESifo working paper: Monetary Policy and International Finance 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.
Subjects: 
exchange rate
chaos
jerk equation
continuous time econometrics
JEL: 
F31
F37
C49
C61
Document Type: 
Working Paper

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