Jiménez Martín, Juan ÁngelNovales Cinca, Alfonso Santiago2023-06-202023-06-202009https://hdl.handle.net/20.500.14352/49264Corresponding author. Dpto. de Fundamentos de Análisis Económico II, Universidad Complutense, Somosaguas, 28223, Spain. Tel.: +34 91 394 2594. Fax: +34 91 394 2613This paper introduces state-uncertainty preferences into the Lucas (1982) economy,showing that this type of preferences helps to explain the exchange rate risk premium. Under these preferences we can distinguish between two factors driving the exchange rate risk premium: “macroeconomic risk” and “the risk associated with variation in the private agents’ perception on the level of uncertainty”. State-uncertainty preferences amount to assuming that a given level of consumption will yield a higher level of utility the lower is the level of uncertainty perceived by consumers. Furthermore, empirical evidence from three main European economies in the transition period to the euro provides empirical support for the model.engtechnical reporthttps://www.ucm.es/icaeopen accessF31F41G12G15Risk premiumTaste shocksFundamental uncertainty.Econometría (Economía)Macroeconomía5302 Econometría5307.14 Teoría Macroeconómica