This paper presents a study in the mainstream of ex-change rate modelling. The literature survey begins with an historical sec-tion, tracing the origins of many presently used prin-ciples and concepts to debates that started over two cen-turies ago. Literature on balance of payments determina-tion is. included as relevant to this survey. The elasti-cities, absorption, and monetary approaches are presented as three basic models which have often served as skele-tons on which recent attempts at modelling exchange rates have been built. Various individual components or aspects of exchange rate modelling are then discussed--components such as expectation formation assumptions, stock and flow effects, and flexibility of prices, whic
