Bretton Woods System
Bretton Woods Conference
Bretton Woods is a ski resort chosen as a location for a conference in 1944 to decide on the new international monetary arrangements for after the end of the Second World War. It was attended by over 700 delegates from 44 allied countries. The conference led to the creation of
- International Monetary Fund IMF
- International Bank for Reconstruction and Development IBRD - this was later to be known as the World Bank
The Aim of the Bretton Woods conference was to provide greater global financial stability and enable the movement of capital to struggling economies
Bretton Woods Exchange Rate System
Bretton woods has been strongly linked to the system of semi fixed exchange rates set up in the post war period. The Bretton Woods exchange rate system had a system of pegged exchange rates with currencies pegged to the dollar. The currencies were only to be revalued in the event of fundamental disequilibrium. The system ended in 1971
Collapse of the Bretton Woods System
In the late 1960s there was a run on the pound and later the dollar. It was partly caused by a booming trade deficit. With the US unwilling to resort to protection is measures the link between the dollar and gold were broken in 1968. There was a short period of floating Bretton woods but it was effectively ended by 1971. Some of the structural changes which undermined the Bretton Woods system included:
- Rise of global trade
- Growth of international currency markets with hedging and speculation causing fluctuations in exchange rate
- Decline of US economic and monetary hegemony. After Second world war the US economy was dominant but it declined in importance by 1970s
- Decline of the Dollar
Related Essays and Revision Notes
- Bretton Woods at Wikipedia
- Fixed Exchange Rates
Economics Revision Guides
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Economics Dictionary
- Economics Dictionary at Amazon UK
- Economics Dictionary at Amazon.com