Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105922
Authors: 
Proaño, Christian R.
Year of Publication: 
2009
Series/Report no.: 
IMK Working Paper 3/2009
Abstract: 
In this paper the role of behavioral forecasting rules of chartist and fun-damentalist type for the dynamic macroeconomic stability of a two-country system is investigated both analytically and numerically. The main result of the paper is that for large trend-chasing parameters in the chartist rule used in the FX market, not only this market but the entire macroeconomic system is destabilized. This takes place despite of the presence of monetary policy rules in both countries which satisfy the Taylor Principle.
Subjects: 
(D)AS-AD
monetary policy
behavioral heterogenous expectations
FX market dynamics.
JEL: 
E12
E31
E32
F41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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