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Do uncertainty and technology drive exchange rates?

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Abstract
This paper investigates the extent to which technology and uncertainty contribute to fluctuations in real exchange rates. Using a structural VAR and bilateral exchange rates, the author finds that neutral technology shocks are important contributors to the dynamics of real exchange rates. Investment-specific and uncertainty shocks have a more restricted effect on international prices. All three disturbances cause short-run deviations from uncovered interest rate parity.

Suggested Citation

  • Pablo Guerrón-Quintana, 2009. "Do uncertainty and technology drive exchange rates?," Working Papers 09-20, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:09-20
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2009/wp09-20.pdf
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    Cited by:

    1. Jesus Fernandez-Villaverde & Pablo Guerron-Quintana & Juan F. Rubio-Ramirez & Martin Uribe, 2011. "Risk Matters: The Real Effects of Volatility Shocks," American Economic Review, American Economic Association, vol. 101(6), pages 2530-2561, October.
    2. Eric van Wincoop & Cedric Tille & Philippe Bacchetta, 2010. "On the Dynamics of Leverage, Liquidity, and Risk," 2010 Meeting Papers 393, Society for Economic Dynamics.

    More about this item

    Keywords

    Foreign exchange; Uncertainty; technological innovations;
    All these keywords.

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