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Pages: 9 (2070 mots) Publié le: 23 février 2011
International Economics_ The Bretton Woods Exchange rate System

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 theBretton 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


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-wartimes 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 partand 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 andmore 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.


Birth of the Bretton Woods System

July 1944 : World Conference of the United Nations in Bretton Woods, New Hampshire: The aim of thisconference was to find a way to react to the mistakes of the financial institutions during the time between World War I and II where strategic devaluations and protectionism befouled the financial system Goals set for the Bretton Woods Conference: -abolishment of barriers that restrain international trade -measures that guarantee the fair pricing of agricultural product and raw materials -plans forfull employment in accordance with the other participating countries The Bretton-Woods- Agreement was finally signed to provide a broad reform of the World Economy using the convertibility, stable and adjustable exchange rates as central aspects Bill White: “the solutions need to be international because the problems are global”

International Economics_ The Bretton Woods Exchange rate SystemCamille Mendel, Samir Selman, Astrid Roland

Core Features :
     

Overview of the Bretton Woods Agreement

Gold-Devisen-Standard : Fixing the parity of 35 USD per ounce gold: USD and Gold can be used as reserve fund for the adjustment in case of imbalance in the balance of payments Guaranteed convertibility of USD and gold : dollar reserves can always be converted into goldwhenever it became necessary Fixing the exchange rates (parities) of the USD to other currencies Obligation of the central banks of the remaining countries to stabilize their rates of exchange by foreign exchange market interventions within a range of 1% around these parities Realignments: possibility of changing the parity in case of fundamental problems in the balance of payments theestablishment of the International Monetary Fund to the international granting of credit in case of problems in the balance of payments

The Institutions:
The International Monetary Fund (IMF) takes a great place in the Bretton Woods-System: it is the institution that functions as a preserver of the functioning of the system and uses its instruments to stabilize the financial order. Its duties and...
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