Fundamental to international finance is the idea of ‘external balance’, whereby a country's external indebtedness does not threaten its ability to meet its international obligations. The requirements of external balance have varied with the nature of the linkages among economies across historical episodes. This article both reviews the major developments in the economic analysis of external balance and traces how nations have sought to achieve it from the era of the gold standard in 19th century through the Bretton Woods system to the era of floating exchange rates that began in 1973.