This paper discusses the profound difficulties of maintaining fixed exchange rates in a world of expanding global capital markets. Contrary to popular wisdom, industrialized-country monetary authorities easily have the resources to defend exchange parities against virtually any private...

A country's current-account balance over any time period is the increase in Residents' claims on foreign incomes or outputs, less the increase in similar foreign-owned claims on home income or output. Thus, in theory, the current account includes not only exports less imports (broadly defined to...