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Long swings and chaos in the exchange rate in a DSGE model with a Taylor rule

  • Bask, Mikael

    ()

    (Bank of Finland Research)

A DSGE model with a Taylor rule is augmented with an evolutionary switching between technical and fundamental analyses in currency trade, where the fractions of these trading tools are determined within the model. Then, a shock hits the economy. As a result, chaotic dynamics and long swings may occur in the exchange rate, which are appealing features of the model given existing empirical evidence on chaos and long swings in exchange rate fluctuations.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0719netti.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 19/2007.

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Length: 28 pages
Date of creation: 12 Nov 2007
Date of revision:
Handle: RePEc:hhs:bofrdp:2007_019
Contact details of provider: Postal:
Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland

Web page: http://www.suomenpankki.fi/en/

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