We derive the optimal exchange rate policy for a small open economy subject to terms-of-trade shocks. Firm owners and workers are risk averse but workers more so. Wages are given or partially indexed in the short run, and capital markets are imperfect. The government sets the exchange rate to...

We derive the optimal exchange rate policy for a small open economy subject to terms-oftrade shocks. Firm owners and workers are risk averse but workers more so. Wages are given or partially indexed in the short run, and capital markets are imperfect. The government sets the exchange rate to...

This article empirically examines the consequences of political uncertainty on the nominal exchange rate returns and the volatility for over hundred countries around the world. We used the monthly political risk data from the International Country Risk Guide and formed three measures of...

This paper assesses redenomination risk in the euro area. We first estimate daily default-risk-free yield curves for French, German, and Italian bonds that can be redenominated and for bonds that cannot. Then, we extract the compensation for redenomination risk from the yield spreads between...

We study spillover of monetary policy uncertainty shock from the US to other economies with different exchange rate regimes. A surge of monetary policy uncertainty in the US incurs contractionary consequences in other economies and decreases output, consumption, and stock market prices. Such...

In this paper, we empirically look at the effects of uncertainty on risk measures for exchange rates, by focusing on two recent specific periods: the Brexit and the outbreak of the Covid-19. Based on a Fama regression extended with uncertainty measures, we forecast exchange rate in the short run...

We study the use of foreign exchange (FX) intervention as an additional policy instrument in anenvironment with learning, where agents infer the central bank policy rules from its policy actions.Under full information, a central bank focused on stabilizing output and inflation can achievebetter...