|Generate QR code
Open Access
Subscription Access
Identification of Euro-Dollar Rate Dynamics Regimes: The Approach Based on Reconstructing Nonlinear Dynamic Systems
https://doi.org/10.32609/0042-8736-2010-12-82-98
Abstract
This paper proposes an empirical approach to euro-dollar rate modeling based on continuous-time dynamic systems. It is shown that the dynamics of the exchange rate and key policy rates of Federal Reserve System and European Central Bank (which are supposed to be the main drivers of the euro-dollar rate) has displayed several regimes in the past, and these regimes can be successfully modeled in terms of linear differential equations. The Grobman-Hartman theorem is used to reconstruct the fundamental nonlinear law of motion of the exchange rate. Linear systems are considered as approximations of a nonlinear system in the neighborhood of its steady states. This approach allows reveal all possible regimes of exchange rate dynamics.
About the Author
M. Kamrotov
National Research University Higher School of Economics
Russian Federation
Russian Federation
References
1. Евстигнеев В. Р. Идеи И. Пригожина в экономике. Нелинейность и финансовые системы// Общественные науки и современность. 1998. № 1. С. 112-121.
2. Камротов М. В. Кредитно-денежная политика США и Еврозоны: координация действий центральных банков и последствия для валютного курса доллара к евро // Экономика XXI века. 2009. № 10. С. 61-84.
3. Малинецкий Г. Г., Потапов А. Б. Современные проблемы нелинейной динамики. М., 2000.
4. Моисеев Н. Н. Системная организация биосферы и концепция коэволюции // Общественные науки и современность. 2000. № 2. С. 123-124.
5. Николис Г., Пригожин И. Самоорганизация в неравновесных системах. М., 1979.
6. Хакен Г. Синергетика. М., 1980.
7. Чернавский Д. С., Старков Н. И., Щербаков А. В. Динамическая модель поведения общества. Синергетический подход к экономике/ Новое в синергетике: взгляд в третье тысячелетие. М., 2002. С. 239-291.
8. Чернавский Д. С., Старков Н. И., Щербаков А. В. О проблемах физической экономики // Успехи физических наук. 2002. Т. 172, № 9. С. 1045-1066.
9. Anker P. UncoveredInterest Parity, Monetary Policy and Time-varying Risk Premia // Journal of International Money and Finance. 1999. Vol. 18, No 6. P. 835-851.
10. Back A., Weigend A. A First Application of Independent Component Analysis to ExtractingStructure from Stock Returns // International Journal of Neural Systems. 1997. Vol. 8, No 4. P. 473-484.
11. Beyaert A., García-Solanes J., Perez-Castejon J. J. Uncovered Interest Parity with SwitchingRegimes // Economic Modelling. 2007. Vol. 24, No 2. P. 189-202.
12. Cecchetti S. G., Krause S. Central Bank Structure, Policy Efficiency and Macroeconomic Performance: Exploring Empirical Relationships // Federal Reserve Bank of St. Louis Review. 2002. July. P. 47-60.
13. Chen J., Mark N. C. Alternative Long-horizon Exchange-rate Predictors // International Journal of Finance and Economics. 1996. Vol. 1, No 4. P. 229-250.
14. Cheung Y., Xu L. Independent Component Ordering in ICA Time Series Analysis // Neurocomputing. 2001. Vol. 41, No 1. P. 145-152.
15. Cheung Y.-W., Chinn M. D., Pascual A. G. Empirical Exchange Rate Models of the Nineties: Are Any Fit to Survive? // Journal of International Money and Finance. 2005. Vol. 24, No 7. P. 1150-1175.
16. De Grauwe P., Grimaldi M. Exchange Rate Puzzle: A Tale of Switching Attractors // European Economic Review. 2006. Vol. 50, No 1. P. 1-33.
17. Faust J., Svensson L. E. Transparency and Credibility: Monetary Policy with UnobservableGoals // International Economic Review. 2001. Vol. 42, No 2. P. 369-397.
18. Frankel J. A., Fajnzylber E., Schmukler S. L., Serven L. Verifying Exchange Rate Regimes // Journal of Development Economics. 2001. Vol. 66, No 2. P. 351-386.
19. Gambacorta L. Monetary Policy and the Risk-taking Channel // BIS Quarterly Review. 2009. Dec. P. 43-53.
20. Gomme P. Central Bank Credibility / Federal Reserve Bank of Cleveland. 2006. http://www. clevelandfed.org/Research/commentary/2006/0801.pdf.
21. Kirikos D. G. A Reconsideration of Uncovered Interest Rate Parity under Switching Policy Regimes// Economia Internazionale. 2004. Vol. 57, No 2. P. 125-144.
22. Kirikos D. G. Discrete Policy Interventionsand Rational Forecast Errors in Foreign Exchange Markets: The Uncovered Interest Parity Hypothesis Revisited // International Journal of Finance and Economics. 2002. Vol. 7, No 4. P. 327-338.
23. Mark N. C. Exchange Rate and Fundamentals: Evidence on Long-horizon Predictability // American Economic Review. 1995. Vol. 85, No 1. P. 201-218.
24. Meese R., Rogoff K. Empirical Exchange Rate Models of the Seventies: Do They Fit out of Sample? // Journal of International Economics. 1983. Vol. 14, No 1/2. P. 3-24.
25. Meese R., Rogoff K. The Out-of-Sample Failure of Empirical Exchange Rate Models: Sampling Error or Misspecification? // Exchange Rates and International Macroeconomics. Chicago, 1983. P. 67-112.
26. Molodtsova T., Nikolsko-Rzhevskyy A., Papell D. Taylor Rules and the Euro / University Library of Munich. 2008. MPRA Paper. mpra.ub.uni-muenchen.de/11348.
27. Obstfeld M., Rogoff K. The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? // NBER Macroeconomics Annual. Cambridge, 2000. P. 339-390.
28. Svensson L. How Should Monetary Policy Be Conducted in an Era of Price Stability // NBER Working Paper No 7516. 2000. http://www.nber.org/papers/w7516.
Review
For citations:
Kamrotov M. Identification of Euro-Dollar Rate Dynamics Regimes: The Approach Based on Reconstructing Nonlinear Dynamic Systems. Voprosy Ekonomiki. 2010;(12):82-98. (In Russ.) https://doi.org/10.32609/0042-8736-2010-12-82-98
Views:
528
Email this article 
