This paper studies the effects of exchange rate uncertainty on prices in an intertemporal context. That is, we focus on trade-offs between current and expected future volatility. We show that uncertainty matters even to risk neutral firms due to its effects on bid/ask spreads in foreign exchange. However, due to intertemporal considerations, firms may choose not to pass through increases in volatility to prices. Moreover, ignoring these intertemporal considerations in empirical analyses will generally bias the resulting ordinary least squares estimates of the effects of uncertainty. [F 31]
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