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Deterministic Chaos versus Stochastic Processes

Author

Listed:
  • Crespo Cuaresma, Jesus

    (Institute for Advanced Studies, Vienna)

Abstract

The classical theory about foreign exchange rate explains its fluctuations as the resulting of a random walk motion. In this paper, such a theory is put into question by performing Brock, Dechert and Scheinkman's (1987) test on the Austrian Schilling - US Dollars exchange rate for the period 1971-1998, giving us strong evidence of nonlinearities in its behaviour. By further analysing, features such as the correlation dimension will be estimated in order to better understand the characteristics of the underlying process.

Suggested Citation

  • Crespo Cuaresma, Jesus, 1998. "Deterministic Chaos versus Stochastic Processes," Economics Series 60, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:60
    as

    Download full text from publisher

    File URL: https://irihs.ihs.ac.at/id/eprint/1128
    File Function: First version, 1998
    Download Restriction: no
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    Citations

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    Cited by:

    1. Daniela Federici & Giancarlo Gandolfo, 2011. "The Euro/Dollar Exchange Rate: Chaotic or Non-Chaotic?," CESifo Working Paper Series 3420, CESifo.
    2. Daniela Federici & Giancarlo Gandolfo, 2001. "Chaos and the exchange rate," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 11(2), pages 111-142.
    3. 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.

    More about this item

    Keywords

    Chaos; BDS Test; Correlation Dimension; Exchange Rate.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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