At the end of World War I, the Treaty of Versailles imposed an indemnity on Germany, a large annual payment from it to the victorious Allies. (Many historians believe this indemnity played a role in destabilizing financial markets in the interwar period and even in bringing on World War II.) In the 1920s, economists John Maynard Keynes and Bertil Ohlin had a spirited debate in the Economic Journal over the possibility that the transfer payment would impose a secondary burden on Germany by worsening its terms of trade. Use the theory developed in this chapter to discuss the mechanisms through which a permanent transfer from Poland to the Czech Republic would affect the real zloty/koruna exchange rate in the long run.