Measurement and effects of euro/dollar exchange rate uncertainty

Joscha Beckmann

Journal of Economic Behavior & Organization, 2021, vol. 183, issue C, 773-790

Abstract: This paper analyzes the identification, drivers and effects of exchange rate uncertainty related to the euro/dollar exchange rate based on survey data. Our measure of common exchange uncertainty for the Euro/Dollar exchange rate is correlated with some alternative uncertainty measures but displays distinctive dynamics. We find that exchange rate uncertainty has significant effects on the real economy and stock markets in the US and Germany which go beyond the effects economic policy uncertainty by Baker et al. (2016) and option-based exchange rate volatility. Short-run exchange rate uncertainty is more informative compared to long-run exchange rate uncertainty and has the potential to capture the overall degree of uncertainty among forecasters.

Keywords: Exchange rates; Disagreement; Uncertainty; Survey data (search for similar items in EconPapers)
JEL-codes: E44 F31 G12 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:183:y:2021:i:c:p:773-790

DOI: 10.1016/j.jebo.2020.06.021

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