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Is There Chaos in the World Economy? A Nonparametric Test Using Consistent Standard Errors

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  • Mototsugu Shintani

    (Vanderbilt University)

  • Oliver Linton

    (London School of Economics)

Abstract

A positive Lyapunov exponent is one practical definition of chaos. We develop a formal test for chaos in a noisy system based on the consistent standard errors of the nonparametric Lyapunov exponent estimators. For international real output series, the hypothesis of the positive Lyapunov exponent is significantly rejected in many cases. One possible interpretation of this result is that the traditional exogenous models are better able to explain business cycle fluctuations than is the chaotic endogenous approach. However, our results are subject to a number of caveats. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 44 (2003)
Issue (Month): 1 (February)
Pages: 331-357

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Handle: RePEc:ier:iecrev:v:44:y:2003:i:1:p:331-357

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