Journal Article

Measurement and Effects of Dollar/Euro Exchange Rate Uncertainty

Author

  • Joscha Beckmann
Publication Date

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.

Info

JEL Classification
E44, F31, G12
DOI
10.1016/j.jebo.2020.06.021

Key Words

  • Exchange rates
  • Disagreement
  • Uncertainty
  • Survey data