Comment

This paper studies the effects of time- varying volatility shocks in the open economy. More specifi cally, it analyzes the consequences of pro-ductivity volatility shocks, monetary- policy volatility shocks, and infl ation- target volatility shocks for the dynamics of exchange rates, the yield curve, and cross- country interest- rate differentials. Spurred in part by signifi cant advances in quantitative economics and computational speed, interest in the macroeconomics of uncer-tainty shocks has experienced a revival in the past few years. Recent applications include an explanation of the great moderation based on a decline in the volatility of structural shocks (Fernández- Villaverde and Rubio- Ramírez 2007; Justiniano and Primiceri 2008), an evaluation of the role of country- spread uncertainty as a driver of business cycles in emerging countries (Fernández- Villaverde et al. 2011), and uncertainty shocks to productivity as determinants of the demand for factors of production at the fi rm level (Bloom 2009). The Benigno, Benigno, an