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Dynamic equilibrium conditions used for building a family of FX rate simulation models

Author

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  • Lukas Ladislav

    (dept.of Statistics and OR, Faculty of Economics, Univ.of West Bohemia, Pilsen, Czech Republic)

Abstract

Paper presents various dynamic FX rate simulation models based upon time-dependent market clearing conditions. Discussed nonlinear models follow classical concept of computer agent interactions between chartists and fundamentalists. Within each trading period agents select proper trading rules in ordrer to determine their speculative positions on the FX money market. Various modes of central bank interventions applying governmental financial policies and modes of market makers expressing different quotations are considered, too. Constitutive expressions being components of dynamic equilibrium conditions, which describe particular trading strategies of interacting agents, central bank interventions, and FX market makers are formulated on the incremental base with white noise adopted perturbations. Numerical results are discussed in detail

Suggested Citation

  • Lukas Ladislav, 2006. "Dynamic equilibrium conditions used for building a family of FX rate simulation models," Computing in Economics and Finance 2006 419, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:419
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    FX money market; market clearing conditions; nonlinear dynamic models; simulation;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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