Premium
Is There Chaos in The World Economy? A Nonparametric Test Using Consistent Standard Errors*
Author(s) -
Shintani Mototsugu,
Linton Oliver
Publication year - 2003
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00073
Subject(s) - lyapunov exponent , nonparametric statistics , estimator , chaotic , econometrics , business cycle , mathematics , chaos (operating system) , series (stratigraphy) , statistical hypothesis testing , economics , statistics , computer science , macroeconomics , paleontology , computer security , management , biology
A positive Lyapunov exponent is one practical definition of chaos. We develop a formal test for chaos in a noisy system based on the consistent standard errors of the nonparametric Lyapunov exponent estimators. For international real output series, the hypothesis of the positive Lyapunov exponent is significantly rejected in many cases. One possible interpretation of this result is that the traditional exogenous models are better able to explain business cycle fluctuations than is the chaotic endogenous approach. However, our results are subject to a number of caveats.