This paper finds that limited exchange rate flexibility in the form of "fear of appreciation" significantly slows adjustment of current account imbalances, providing novel support for Friedman's conjecture regarding exchange-rate flexibility. We present a new stylized fact: floaters have faster...

This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises. A simple analytical model highlighting the process leading to such crises is first developed. The basic framework is then extended to deal with a variety of issues, such as:...