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Exchange rate dynamics, central bank interventions and chaos control methods

  • Frank Westerhoff

    ()

    (University of Osnabrueck, Department of Economics)

  • Cristian Wieland

    (University of Osnabrueck, Department of Economics)

We use a simple chartist-fundamentalist model developed by Day and Huang to explore recent chaos control algorithms as potential candidates for central bank intervention rules. We find that methods such as delayed feedback control, OGY and constant feedback have, in principle, the potential to reduce exchange rate variability and deviations from fundamentals even in the presence of large dynamic noise.

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Paper provided by Society for Computational Economics in its series Modeling, Computing, and Mastering Complexity 2003 with number 22.

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Handle: RePEc:sce:cplx03:22
Contact details of provider: Web page: http://zai.ini.unizh.ch/complexity2003/

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