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Explaining the Stylized Facts of Foreign Exchange Markets with a Simple Agent-based Version of Paul de Grauwe’s Chaotic Exchange Rate Model
Mignot, Sarah; Westerhoff, Frank (2025): Explaining the Stylized Facts of Foreign Exchange Markets with a Simple Agent-based Version of Paul de Grauwe’s Chaotic Exchange Rate Model, in: Bamberg: Otto-Friedrich-Universität, S. 845–876.
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Publisher Information:
Year of publication:
2025
Pages:
Source/Other editions:
Computational Economics, Dordrecht [u.a.]: Springer Science and Business Media LLC, 2025, Jg. 65, Nr. 2, S. 845–876, ISSN: 1572-9974
Year of first publication:
2025
Language:
English
Abstract:
We propose a simple agent-based version of Paul de Grauwe’s chaotic exchange rate model. In particular, we assume that each speculator follows his own technical and fundamental trading rule. Moreover, a speculator’s choice between these two trading philosophies depends on his individual assessment of current market circumstances. Our agent-based model setup is able to explain a number of important stylized facts of foreign exchange markets, including bubbles and crashes, excess volatility, fat-tailed return distributions, serially uncorrelated returns and volatility clustering. A stability and bifurcation analysis of its deterministic skeleton provides us with useful insights that foster our understanding of exchange rate dynamics.
Keywords: ; ; ; ;
Foreign exchange markets
Exchange rates
Chartists and fundamentalists
Agent-based computational economics
Stability and bifurcation analysis
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Peer Reviewed:
Yes:
International Distribution:
Yes:
Type:
Article
Activation date:
May 8, 2025
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https://fis.uni-bamberg.de/handle/uniba/107100