Introduction When exchange rates first began floating in the early twentieth century, in the aftermath of World War I, Keynes (1924, 187) wrote that ‘the academic dream of a hundred years, doffing its cap and gown, clad in paper rags, has crept into the world by means of the bad fairies’.1 This particular ‘dream’ came true once more half-a-century later, when the major currencies began floating again after the break-up of the Bretton Woods system in the early 1970s.