ABSTRACT
In an increasingly global economy, where barriers to trade and financial flows amongst nations have tended to be reduced, especially since the early 1970s, policymakers must be ever vigilant in ensuring that their country’s external balances, particularly the balance of payments and the exchange rate, evolve in ways that create the possibility of expanded and sustained economic growth and development, rather than evolving in the direction of potential disaster. In modern economies linked by virtually instantaneous and twenty-four-hour flows among the world’s financial markets in London, Paris, Frankfurt, Tokyo, Hong Kong, Seoul, Sydney, Mexico City, Buenos Aires, Toronto and New York, disequilibrium situations that are not corrected fairly quickly can lead to severe crises over the longer term.
