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Measurement and effects of euro/dollar exchange rate uncertainty

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  • Beckmann, Joscha

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.

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  • Beckmann, Joscha, 2021. "Measurement and effects of euro/dollar exchange rate uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 773-790.
    • Handle: RePEc:eee:jeborg:v:183:y:2021:i:c:p:773-790
    DOI: 10.1016/j.jebo.2020.06.021
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    Cited by:

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    3. Bak, Yuhyeon & Park, Cheolbeom, 2022. "Exchange rate predictability, risk premiums, and predictive system," Economic Modelling, Elsevier, vol. 116(C).
    4. Beckmann, Joscha & Boonman, Tjeerd M., 2022. "Expectations, disagreement and exchange rate pressure," Economics Letters, Elsevier, vol. 212(C).
    5. Huang, Rong & Pilbeam, Keith & Pouliot, William, 2022. "Are macroeconomic forecasters optimists or pessimists? A reassessment of survey based forecasts," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 706-724.
    6. Kuang, Pei & Tang, Li & Zhang, Renbin & Zhang, Tongbin, 2022. "Forecast disagreement about long-run macroeconomic relationships," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 371-387.
    7. Zeng, Ting & Zhao, Wei & Liu, Zhengning, 2022. "Investment response to exchange rate uncertainty: Evidence from Chinese exporters," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 488-505.

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    More about this item

    Keywords

    Exchange rates; Disagreement; Uncertainty; Survey data;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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