Abstract

We investigated chaotic property of foreign exchange rates (ForExRate) of several countries in which daily data where considered for twelve countries (Das and Das, 2007), mostly over the period January 1971 to December 2005. Everyone is aware of the acute recession into which the world economy entered since around July 2008. To investigate what effect this has on ForExRate of different countries, here we concentrated on data during the period of January 2008 to December 2009. Here we calculated the largest Lyapunov exponent (LLE) and compared the changes in its values before and during the recession period. We find that our earlier classification of countries based on LLEs holds true. Also we can conclude that the more nonlinear structure its foreign exchange rate shows the more its LLE changes. We also examined the relation of balance of trade (BoT) -being one of the fundamental news with financial market to ForExRate. For some countries, the ForExRate is falling sharply as BoT is increasing in the same period. The BOT curves for of all the countries considered here show that the US was facing less exports to other countries which may indicate the advent of a recession era.

Key words: Foreign exchange rate, balance of trade, surrogate, nonlinearity, Lyapunov exponent, chaos.