It is demonstrated in this paper that adaptive learning in least squares sense may be incapable to reduce, in a satisfactory way, the number of attainable equilibria in a rational expectations model. The model investigated, as an illustration, is the monetary approach to exchange rate...

The aim of this paper is to analyse the announcement effects on exchange rate movements using the basic asset pricing model, where currency trade is partly determined by technical trading in the form of moving averages since it is the most commonly used technique according to questionnaire...

The aim of this paper is to determine whether it would be desirable from the perspective of macroeconomic balance for central banks to take account of nominal exchange rate movements when framing monetary policy. The theoretical framework is a small, open DSGE economy that is closed by a Taylor...

This study shows that an expectations-based optimal policy rule has desirable properties in a standard macroeconomic model incorporating a cost channel for monetary disturbances and inflation rate expectations that are partly backwardlooking. Specifically, optimal monetary policy under...

We embed different instrument rules into a New Keynesian model for a small open economy that is augmented with technical trading in currency trade to examine the prerequisites for monetary policy. Specifically, this paper focuses on conditions for a determinate, least-squares learnable rational...

We embed an expectations-based optimal policy rule into a DSGE model for a small open economy that is augmented with trend extrapolation or chartism, which is a form of technical trading, in currency trade to examine the prerequisites for monetary policy. We find that a unique REE that is...

The difference between market risk and potential market risk is emphasized and a measure of the latter risk is proposed. Specifically, it is argued that the spectrum of smooth Lyapunov exponents can be utilized in what we call (λ, σ2)-analysis, which is a method to monitor the aforementioned...

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...

We present a model of exchange rates, which incorporates the monetary approach and technical trading, and we present the reduced form based on the minimal state variable solution, where both fundamentals and backward-looking term determine the spot exchange rates. Finally, we estimate the impact...

The aim of this paper is to illustrate how the stability of a stochastic dynamic system is measured using the Lyapunov exponents. Specifically, we use a feedforward neural network to estimate these exponents as well as asymptotic results for this estimator to test for unstable (chaotic)...