The complex interplay between exchange rate and real markets
An agent-based model exploration
Bibliographic Data
| ID | 7177280 |
|---|---|
| Authors | Domenico Delli Gatti (0000-0001-8819-090X, corresponding author), Tommaso Ferraresi (0000-0002-4876-1314), Filippo Gusella (0000-0003-3943-9574), Lilit Popoyan (0000-0002-9209-0896), Giorgio Ricchiuti (0000-0003-1309-3165), Andrea Roventini (0000-0001-5518-3084) |
| Year | 2025 |
| Volume | 238 |
| Pages | 107252-107252 |
| Publication date | 2025-09-24 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Journal of Economic Behavior & Organization (JOURNAL) |
| Journal identifiers | ISSN: 0167-2681 • E-ISSN: 1879-1751 |
| Publisher | Elsevier BV (PUBLISHER) |
| DOI | 10.1016/j.jebo.2025.107252 |
| OpenAlex | W7083163281 |
| Language | EN |
| References cited | 84 |
We extend the multi-country, multi-sector agent-based model of Dosi et al. (2019); Dosi et al. (2021) by integrating a currency market populated by heterogeneous financial agents—chartists and fundamentalists—who form expectations and trade foreign exchange based on boundedly rational heuristics. This addition generates complex real-financial interactions, wherein the exchange rate acts both as a channel of transmission for endogenous macroeconomic fluctuations and as an independent source of financial shocks. Through extensive simulations, the model reproduces salient empirical regularities of exchange rate behavior—such as excess volatility, fat-tailed return distributions, volatility clustering, and cross-country contagion—and sheds light on the amplification mechanisms linking financial speculation to real economic instability. Finally, we evaluate the effectiveness of central bank interventions under different policy rules and market configurations, highlighting their conditional capacity to stabilize macroeconomic dynamics in the presence of adaptive agent behavior
Currency · Exchange rate · Financial market · Foreign exchange · Foreign exchange market · Interest rate parity · Rational expectations · Salient · Speculation · Volatility (finance · Geochemistry and Geologic Mapping · Geological Modeling and Analysis · Seismic Imaging and Inversion Techniques
Schumpeter meeting Keynes
Postwar U.S. Business Cycles
The Real Exchange Rate and Economic Growth
Empirical exchange rate models of the seventies
Understanding Productivity
Exceptional exporter performance
The Rise of Market Power and the Macroeconomic Implications
The Empirics of Firm Heterogeneity and International Trade
Markups and Firm-Level Export Status
Economic Development with Unlimited Supplies of Labour
Measuring Business Cycles
Macroeconomic Policy in DSGE and Agent-Based Models Redux
Learning, market selection and the evolution of industrial structures
Firm Productivity, Exchange Rate Movements, Sources of Finance, and Export Orientation
Exchange Rate Dynamics Redux
Exchange Rates and Fundamentals
The Relation between Price and Marginal Cost in U.S. Industry
Expectations and Exchange Rate Dynamics
Order Flow and Exchange Rate Dynamics
Catching Up, Forging Ahead, and Falling Behind
| Highly cited | No |
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