A recent literature has pointed at potential negative effects of exchange rate volatility on innovation. In this paper, we propose that there may be a direct effect as well as an indirect effect via export activity. We test these hypotheses for sectoral R&D intensities using OECD panel data for...

Since the establishment in 1979 of the Exchange Rate Mechanism of the EMS a number of countries, after entry, have experienced a substantial and persistent rise in their real exchange rate (the ratio of domestic to foreign prices). This paper explains this phenomenon in terms of a `peso problem'...