International Economics_ The Bretton Woods Exchange rate System I.

Historical background carries a new monetary system
1. 2. 3. The pre-War situation Birth of the Bretton Woods system Overview of the Bretton Woods agreement – Core features – The Bretton Woods Institutions

II. The Bretton Woods Regime
1. Exchange rate mechanism 2. The Bretton Woods experience

III. Collapse of the Bretton Woods system
1. 2. External Causes Main Causes

Conclusion and Lessons

International Economics_ The Bretton Woods Exchange rate System

Camille Mendel, Samir Selman, Astrid Roland

I.

Historical background carries a new monetary system
1. The pre-War situation

After World War I most countries wanted to return to the old financial security and stable situation of pre-war times as soon as possible. Discussions about a return to the gold standard began and by 1926 all leading economies had re-established the system, according to which every nation’s circulating money had to be backed by reserves of gold and foreign currencies to a certain extent. But several mistakes in implementing the gold standard (mainly that a weakened Great Britain had to take the leading part and that a number of main currencies where over- or undervalued) led to a collapse of the economic and financial relations, peaking in the Great Depression in 1929. Every single country tried to increase the competitiveness of its export products in order to reduce its payment balance deficit by deflating its currency. This strategy only led to success as long as a country was deflating faster and more strongly than all other nations. This fact resulted in an international deflation competition that caused mass unemployment, bankruptcy of enterprises, the failing of credit institutions, as well as hyper inflations in the countries concerned.

2.

Birth of the Bretton Woods System

July 1944 : World Conference of the United Nations in Bretton Woods, New Hampshire: The aim of this