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A Positive Lyapunov Exponent in Swedish Exchange Rates?

Author

Listed:
  • Bask, Mikael

    (Department of Economics, Umeå University)

Abstract

Can nominal exchange rates be characterized by deterministic chaos? To answer this question, a statistical framework utilizing a blockwise bootstrap procedure is used to test for the presence of a positive Lyapunov exponent in an observed stochastic time series (Bask and Gencay, 1998). Daily data for the Swedish Krona against the Deutsche Mark, the ECU, the U.S. Dollar and the Yen exchange rates are examined. In most cases, the null hypothesis that the exchange rate series is not generated by a chaotic dynamical system can be rejected and these results are consistent with the hypothesis that the exchange rate series may be characterized by deterministic chaos.

Suggested Citation

  • Bask, Mikael, 2000. "A Positive Lyapunov Exponent in Swedish Exchange Rates?," Umeå Economic Studies 528, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0528
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    Citations

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    Cited by:

    1. Bask, Mikael, 2007. "Long swings and chaos in the exchange rate in a DSGE model with a Taylor rule," Research Discussion Papers 19/2007, Bank of Finland.
    2. Luis-Felipe Zanna & Mr. Marco Airaudo, 2012. "Interest Rate Rules, Endogenous Cycles, and Chaotic Dynamics in Open Economies," IMF Working Papers 2012/121, International Monetary Fund.
    3. Elena Olmedo, 2014. "Forecasting Spanish Unemployment Using Near Neighbour and Neural Net Techniques," Computational Economics, Springer;Society for Computational Economics, vol. 43(2), pages 183-197, February.
    4. Bask, Mikael, 2009. "Instrument rules in monetary policy under heterogeneity in currency trade," Journal of Economics and Business, Elsevier, vol. 61(2), pages 97-111.
    5. Daniela Federici & Giancarlo Gandolfo, 2011. "The Euro/Dollar Exchange Rate: Chaotic or Non-Chaotic?," CESifo Working Paper Series 3420, CESifo.
    6. Saeed Moshiri & Forough Seifi, 2008. "Nonlinearity in Exchange Rates and Forecasting," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 13(1), pages 83-105, spring.
    7. Elena Olmedo & Ricardo Gimeno & Lorenzo Escot & Ruth Mateos, 2007. "Convergencia y Estabilidad de los Tipos de Cambio Europeos: Una Aplicación de Exponentes de Lyapunov," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 44(129), pages 91-108.
    8. Hirata, Yoshito & Aihara, Kazuyuki, 2012. "Timing matters in foreign exchange markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(3), pages 760-766.
    9. repec:zbw:bofrdp:2007_019 is not listed on IDEAS
    10. Olmedo,E. & Velasco, F. & Valderas, J.M., 2007. "Caracterización no lineal y predicción no paramétrica en el IBEX35/Nonlinear Characterization and Predictions of IBEX 35," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 25, pages 815-842, Diciembre.
    11. Marisa Faggini, 2011. "Chaotic Time Series Analysis in Economics: Balance and Perspectives," Working papers 25, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    12. Federici, Daniela & Gandolfo, Giancarlo, 2012. "The Euro/Dollar exchange rate: Chaotic or non-chaotic? A continuous time model with heterogeneous beliefs," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 670-681.
    13. Vitaliy Vandrovych, 2005. "Study of Nonlinearities in the Dynamics of Exchange Rates: Is There Any Evidence of Chaos?," Computing in Economics and Finance 2005 234, Society for Computational Economics.

    More about this item

    Keywords

    Deterministic chaos; Exchange rates; Lyapunov exponents; Moving blocks bootstrap; Phase space reconstruction;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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