Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/76491 
Year of Publication: 
2003
Series/Report no.: 
CESifo Working Paper No. 1045
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We develop a simple model of the foreign exchange market in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one.This model produces two kinds of equilibria, a fundamental and a bubble one. In a stochastic environment the model generates a complex dynamics in which bubbles and crashes occur at unpredictable moments. We also analyse the empirical relevance of the model.
Document Type: 
Working Paper
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