Purchasing power parity, nonlinearity and chaos
AbstractThis study contrasts the (apparent) random walk behaviour of the real exchange rate to chaotic dynamics, using (US) dollar-based real exchange rates for 17 OECD countries (covering the period 1957:1-1995:4). Tests for deterministic noisy chaos are carried out using the Nychka, Ellner, Gallant and McCaffrey (1992) test for positivity of the maximum Lyapunov exponent. There is evidence of nonlinear chaotic dynamics in seven real exchange rate series, suggesting that real exchange rate movements might not be really random.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Financial Economics.
Volume (Year): 10 (2000)
Issue (Month): 6 ()
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