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Revisiting Paul de Grauwe’s Chaotic Exchange Rate Model : New Analytical Insights and Agent-Based Explorations
Mignot, Sarah; Westerhoff, Frank H. (2023): Revisiting Paul de Grauwe’s Chaotic Exchange Rate Model : New Analytical Insights and Agent-Based Explorations, in: Bamberg: Otto-Friedrich-Universität, S. 155–169.
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Publisher Information:
Year of publication:
2023
Pages:
Source/Other editions:
Open Economies Review, 34 (20239, 1, S. 155–169 . - ISSN: 1573-708X
Year of first publication:
2023
Language:
English
Abstract:
We apply recent stability and bifurcation results to provide an analytical characterization of Paul de Grauwe’s chaotic exchange rate model. We prove that the model’s fundamental steady state becomes unstable due to a Neimark-Sacker bifurcation when chartists extrapolate past exchange rate trends too strongly, a phenomenon that gives rise to cyclical exchange rate dynamics. In contrast, fundamentalists’ mean reversion strength only has a stabilizing effect on the model’s dynamics when the exchange rate is out of equilibrium. We also show that agent-based versions of Paul de Grauwe’s exchange rate model may produce endogenous exchange rate dynamics, too.
GND Keywords:
Wechselkurstheorie
Keywords: ; ; ; ;
Foreign exchange markets
Exchange rate dynamics
Chartists and fundamentalists
Stability and bifurcation analysis
Agent-based modeling
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Peer Reviewed:
Yes:
International Distribution:
Yes:
Type:
Article
Activation date:
April 14, 2023
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https://fis.uni-bamberg.de/handle/uniba/58816