Nonlinear dynamics in foreign exchange markets

Four types of nonlinear dynamics are empirically analysed here in respect of the current international foreign exchange markets, e.g. autoregressive heteroscedasticity model, Lorenz-type chaos, hysteresis and the positive feedback model. The estimated results provide strong support to the existence of significant nonlinearities in the exchange market dynamics in an intel national framework. Also, future expectations play an equal or more dominant role over past trends in influencing the current rates of market volatility.