Discrete Dynamics in Nature and Society
Volume 4 (2000), Issue 4, Pages 309-317
doi:10.1155/S1026022600000297
Chaotic dynamics in a flexible exchange rate system: a study of noise effects
Toichiro Asada1
, Tetsuya Misawa2
and Toshio Inaba3
1Faculty of Economics, Chuo University, 742-1, Higashinakano, Hachioji, Tokyo 192-0393, Japan
2Faculty of Economics, Nagoya City University, Mizuho-cho, Mizuho-ku, Nagoya 467-0001, Japan
3School of Education, Wasada University, 1-6-1, Nishiwaseda, Shinjuku-ku, Tokyo 169-0051, Japan
Abstract
In this paper, we investigate by means of analytical method and numerical simulations the properties of three-dimensional business cycle model, in which foreign exchange rate is flexible and a parameter is fluctuated by noise. The model is a discrete time version of Asada (Journal of Economics, 62, 239-269,1995)'s continuous time open economy model without noise. We show (1) noise may suppress the burst of flexible foreign exchange rate when its behavior begins to burst as a bifurcation parameter (adjustment speed of the goods market) is increased, (2) the windows of cycles can be broken by noise, and (3) noise may reveal the hidden structures.