The concept of authority has recently received heightened attention in the international politics literature. Unfortunately, considerable confusion still exists regarding who possesses authority, how authority is constituted, how it erodes and how it differs from other means of generating compliance, most notably power. Drawing on work from international political economy and political theory, this article sets out to clarify some of the many ambiguities surrounding authority. It builds hypotheses regarding state/market authority relations and tests these hypotheses in the context of the Exchange Rate Mechanism (ERM) crisis of 1992–93. The article concludes that the ERM crisis did not represent a mere ‘bump in the road’ on the way to European Monetary Union, but rather the break-up of policy consensus in a dramatic way.