Exchange rate dynamics, central bank interventions and chaos control methods

We use a simple chartist-fundamentalist model developed by Day and Huang to explore recent chaos control algorithms as potential candidates for central bank intervention rules. We find that methods such as delayed feedback control, OGY and constant feedback have, in principle, the potential to reduce exchange rate variability and deviations from fundamentals even in the presence of large dynamic noise. (c) 2004 Elsevier B.V. All rights reserved.