Chaotic monetary dynamics with confidence

This paper uses tools from dynamical systems theory to investigate the properties of Canadian and US money and velocity measures. In doing so, we follow the recent contribution by Whang and Linton [Whang, Y.-J., Linton, O., 1999. The asymptotic distribution of nonparametric estimates of the Lyapunov exponent for stochastic time series. Journal of Econometrics 91, 1-42] and construct the standard error for the Nychka et al. [Nychka, D.W., Ellner, S., Gallant, R.A., McCaffrey, D., 1992. Finding chaos in noisy systems. Journal of the Royal Statistical Society B 54, 399-426] dominant Lyapunov exponent. Comparisons are made among simple-sum, Divisia, and currency equivalent aggregates at different levels of monetary aggregation. We find statistically significant evidence against low-dimensional chaos and point to the use of stochastic models and statistical inference in the modeling of these variables.