The role of domestic and foreign economic uncertainties in determining the foreign exchange rates: an extended monetary approach

Abstract This study extends the monetary model of exchange rate by incorporating news-based domestic and US economic policy uncertainties (EPUs). We consider 12 developed developing economies use monthly data covering 2000:M1 to 2017:M2. The extended is estimated panel quantile regression Machado Santos Silva (2019) Pesaran (2006) common correlated effects within linear nonlinear ARDL frameworks. estimates illustrate significant EPUs on economies. models show that impact mostly a long-run phenomenon. Wald test statistics confirm asymmetric at different quantiles. Moreover, also support increasing decreasing EPUs. Overall, domestic, foreign significantly affect economies’ rates, least in long run. Therefore, uncertainty should be considered determining rate. might more appropriate post-Covid-19 era.