Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/191895 
Title: 

Can a cusp catastrophe model describe the effect of sanctions on exchange rates?

The document was removed on behalf of the author(s)/ the editor(s).

Year of Publication: 
2019
Series/Report no.: 
Economics Discussion Papers No. 2019-2
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
Fluctuations of exchange rates, like any other economic variables, are very common in financial markets. However, sometimes because of political and economic tensions, exchange rates exhibit abrupt crashes that lead to structural break. In this paper, the author answers the question whether a catastrophe model can be used for modeling the collapse of exchange rates caused by economic sanctions. For this goal, he uses a cusp catastrophe model for fitting the dynamics of fluctuations of the Iranian Rial against the US Dollar. Using two sentiment variables, i.e. trading volume and ratio of institutional to individual trades of gold futures contracts, the author has shown that the collapse of Iranian currency can be best explained by cusp catastrophe theory.
Subjects: 
cusp catastrophe theory
exchange rate
fluctuations
JEL: 
C13
C53
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

Files in This Item:
The document was removed on behalf of the author(s)/ the editor(s) on: May 7, 2019


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