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This paper reviews the literature on exchange rate economics over the last two decades, with particular reference to recent developments. Exchange rate economics has been one of the most active-if challenging-areas of economic research over the last twenty years, and the amount of ground covered here is correspondingly vast. Thus, we can only hope to give a selective survey of the terrain and of its major promontories. In particular, we discuss the evidence on foreign exchange market efficiency (Section II), the theory and evidence relating to the determination of exchange rates (Sections III and IV respectively), recent work on the effectiveness of foreign exchange intervention (Section V), and the recent literature on exchange rate behavior within target zones (Section VI). The emerging literature on foreign exchange market microstructure is also briefly discussed (Section VII). In the concluding section of the …