This paper examines the impact of real exchange rate volatility on long-term productivity growth, highlighting the critical role of financial development. The authors find that for countries with low levels of financial development, exchange rate volatility generally reduces growth, while for financially advanced countries, there is no significant effect. The study uses an 83-country dataset spanning 1960-2000 and employs a simple monetary growth model to explain the relationship between real exchange rate uncertainty and investment constraints. The empirical results are robust to various measures of financial development and exchange rate volatility, as well as to alternative control variables. The findings suggest that a more flexible exchange rate regime can be beneficial for growth in financially developed countries, but it may have negative consequences for less financially developed economies.This paper examines the impact of real exchange rate volatility on long-term productivity growth, highlighting the critical role of financial development. The authors find that for countries with low levels of financial development, exchange rate volatility generally reduces growth, while for financially advanced countries, there is no significant effect. The study uses an 83-country dataset spanning 1960-2000 and employs a simple monetary growth model to explain the relationship between real exchange rate uncertainty and investment constraints. The empirical results are robust to various measures of financial development and exchange rate volatility, as well as to alternative control variables. The findings suggest that a more flexible exchange rate regime can be beneficial for growth in financially developed countries, but it may have negative consequences for less financially developed economies.