We estimate variance decompositions of the real exchange rates for 19 individual currencies based on a present-value relation. We document substantial heterogeneity across forecasting horizons and currencies regarding the determinants of exchange rates. At short horizons, the dominant force is...

We estimate variance decompositions of the real exchange rates for 19 currencies based on a present-value relation. We document substantial heterogeneity across forecasting horizons and currencies. At short horizons, the dominant force is predictability of the future spot rates. At long...