The Chaotic Structure Of The $C/$US Exchange Rate

Abstract

This paper provides a brief survey of previous applications of chaotic analysis to exchange rate series and of the connection between theoretical models of exchange rates and the chaotic approach. and then considers the key elements required to establish a chaotic structure and apply the analysis to the daily $C/$US exchange rates over the period 1973 to 2003 In particular the overshooting hypothesis as represented by the chaotic structure is investigated.

Chaos in Economics

“…The empirical evidence in favor of chaos in the exchange rate is not very strong. Sometimes chaos has been detected in the data (see Bajo-Rubio et al 1992;De Grauwe et al 1993;Chen, 1999;Bask, 2002;Brzozowska-Rup and Orlowski, 2004;Weston, 2007;Torkamani et al, 2007;Das and Das, 2007;Mishra, 2011), but most often no such dynamics has been found (Brooks, 1998;Guillaume, 2000;Federici and Gandolfo, 2002;Serletis and Shahmoradi, 2004;Vandrovych, 2005;Resende and Zeidan, 2008;Adrangi et al, 2010). In general, the empirical evidence for chaotic dynamics in economic time series is very fragile.…”

The Euro/Dollar Exchange Rate: Chaotic or Non-Chaotic?

“…The empirical evidence in favour of chaos in the exchange rate is not very strong. Sometimes chaos has been detected in the data (see Bajo-Rubio et al 1992;De Grauwe et al 1993;Chen, 1999;Bask, 2002;Brzozowska-Rup and Orlowski, 2004;Weston, 2007;Torkamani et al, 2007) but most often no such dynamics has been found (Brooks, 1998;Guillaume, 2000;Federici and Gandolfo, 2002;Serletis and Shahmoradi, 2004;Resende and Zeidan, 2008). In general, the empirical evidence for chaotic dynamics in economic time series is very fragile.…”

“…I) On the one hand, there are studies that simply examine the data and apply various tests, such as the studies mentioned above (for applications to the exchange rate see Bajo-Rubio et al, 1992;Cuaresma, 1998;Guillaume, 2000, Chap. 3;Schwartz and Youse…, 2003;Weston, 2007). These tests have been originally developed in the physics literature.…”