In spite of the concerns about “twin deficits†(fiscal and current account deficits) for the U.S., empirical evidence suggests that “twin divergence†is a more regular feature of the data: when the fiscal accounts worsen, the current account improves and vice versa. We thus...

Currency crises are usually associated with large real depreciations. In some countries real depreciations are perceived to be very costly("fear of floating"). In this paper we try to understand the reasons behind this fear. We first look at episodes of currency crises in the '90s and establish...