The paper identifies a unique dimension of currency carry trades that it is related to the intensity of technology transition across countries. Particularly, I show that technology diffusion is a fundamental determinant of currency premia and it is priced in the cross-section of currency excess...

In the presence of potential technology spillovers, I demonstrate that a firm's absorptive capacity (AC), as proxied by R&D investments, is crucial to benefit from spillovers. I find that higher AC firms, when exposed to large potential spillovers, exhibit stronger future real outcomes...