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Chaotic dynamics in a flexible exchange rate system:A study of noise effects

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  • Toichiro Asada
  • Tetsuya Misawa
  • Toshio Inaba

Abstract

In this paper, we investigate by means of analytical method and numerical simulations the properties of three-dimensional business cycle model, in which foreign exchange rate is flexible and a parameter is fluctuated by noise. The model is a discrete time version of Asada ( Journal of Economics , 62, 239–269,1995)'s continuous time open economy model without noise. We show (1) noise may suppress the burst of flexible foreign exchange rate when its behavior begins to burst as a bifurcation parameter (adjustment speed of the goods market) is increased, (2) the windows of cycles can be broken by noise, and (3) noise may reveal the hidden structures.

Suggested Citation

  • Toichiro Asada & Tetsuya Misawa & Toshio Inaba, 2000. "Chaotic dynamics in a flexible exchange rate system:A study of noise effects," Discrete Dynamics in Nature and Society, Hindawi, vol. 4, pages 1-9, January.
    • Handle: RePEc:hin:jnddns:982161
    DOI: 10.1155/S1026022600000297
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