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The Nonlinear Real Exchange Rate Growth Model

Author

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  • Vesna D. Jablanovic

    (University of Belgrade, Faculty of Agriculture, Belgrade, Serbia.)

Abstract

Chaos theory is used to prove that erratic and chaotic fluctuations can indeed arise in completely deterministic models. Chaos theory reveals structure in aperiodic, dynamic systems. The number of nonlinear business cycle models use chaos theory to explain complex motion of the economy. The basic aim of this paper is to provide a relatively simple chaotic real exchange rate growth model that is capable of generating stable equilibria, cycles, or chaos. A key hypothesis of this work is based on the idea that the coefficient plays a crucial role in explaining local stability of the real exchange rate growth , where, s – private saving rate , bm - marginal budget deficit coefficient, b – average budget deficit coefficient, p - productivity and n – net capital outflow rate, ß – coefficient which describes relation between budget deficit and net capital outflow

Suggested Citation

  • Vesna D. Jablanovic, 2013. "The Nonlinear Real Exchange Rate Growth Model," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 4(2), pages 12-15, May.
    • Handle: RePEc:aii:ijcmss:v:4:y:2013:i:2:p:12-15
    as

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    References listed on IDEAS

    as
    1. Richard H. Day, 1983. "The Emergence of Chaos from Classical Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 201-213.
    2. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
    3. Benhabib, Jess & Day, Richard H., 1982. "A characterization of erratic dynamics in, the overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 37-55, November.
    4. Day, Richard H, 1982. "Irregular Growth Cycles," American Economic Review, American Economic Association, vol. 72(3), pages 406-414, June.
    5. Jess Benhabib & Richard H. Day, 1981. "Rational Choice and Erratic Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(3), pages 459-471.
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