Please use this identifier to cite or link to this item:
De Grauwe, Paul
Grimaldi, Marianna
Year of Publication: 
Series/Report no.: 
CESifo Working Paper No. 1194
We develop a simple model of the exchange rate 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 contrast these behavioural bubbles with rational bubbles.
exchange rate
bounded rationality
heterogeneous agents
bubbles and crashes
complex dynamics
Document Type: 
Working Paper

Files in This Item:

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