Revisiting Paul de Grauwe’s Chaotic Exchange Rate Model : New Analytical Insights and Agent-Based Explorations
Faculty/Professorship: | Economic Policy |
Author(s): | Mignot, Sarah; Westerhoff, Frank H. ![]() |
Publisher Information: | Bamberg : Otto-Friedrich-Universität |
Year of publication: | 2023 |
Pages: | 155–169 |
Source/Other editions: | Open Economies Review, 34 (20239, 1, S. 155–169 . - ISSN: 1573-708X |
is version of: | 10.1007/s11079-022-09667-5 |
Year of first publication: | 2023 |
Language(s): | English |
Licence: | Creative Commons - CC BY - Attribution 4.0 International |
URN: | urn:nbn:de:bvb:473-irb-588164 |
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 |
DDC Classification: | 330 Economics |
RVK Classification: | QM 331 |
Peer Reviewed: | Ja |
International Distribution: | Ja |
Type: | Article |
URI: | https://fis.uni-bamberg.de/handle/uniba/58816 |
Release Date: | 14. April 2023 |
Project: | Open-Access-Publikationskosten 2022 - 2024 |
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originated at the
University of Bamberg
University of Bamberg