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    Bretton Wood System

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    Xulqarnain Saqlaini
    The Bretton Woods system was an international monetary management system established in 1944 by 730 delegates from 44 Allied nations. It created rules for commercial and financial relations after World War II and established the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (World Bank) to regulate exchange rates and provide financing. The system established a gold-based standard that pegged currencies to the U.S. dollar and enabled the IMF to bridge payments imbalances. However, the system broke down in 1971 when the U.S. ended convertibility of dollars to gold, ending the Bretton Woods system.

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    Bretton Wood System

    Uploaded by

    Xulqarnain Saqlaini
    449 views2 pages
    The Bretton Woods system was an international monetary management system established in 1944 by 730 delegates from 44 Allied nations. It created rules for commercial and financial relations after World War II and established the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (World Bank) to regulate exchange rates and provide financing. The system established a gold-based standard that pegged currencies to the U.S. dollar and enabled the IMF to bridge payments imbalances. However, the system broke down in 1971 when the U.S. ended convertibility of dollars to gold, ending the Bretton Woods system.

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    The Bretton Woods system was an international monetary management system established in 1944 by 730 delegates from 44 Allied nations. It created rules for commercial and financial relations after World War II and established the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (World Bank) to regulate exchange rates and provide financing. The system established a gold-based standard that pegged currencies to the U.S. dollar and enabled the IMF to bridge payments imbalances. However, the system broke down in 1971 when the U.S. ended convertibility of dollars to gold, ending the Bretton Woods system.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    449 views2 pages

    Bretton Wood System

    Uploaded by

    Xulqarnain Saqlaini
    The Bretton Woods system was an international monetary management system established in 1944 by 730 delegates from 44 Allied nations. It created rules for commercial and financial relations after World War II and established the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (World Bank) to regulate exchange rates and provide financing. The system established a gold-based standard that pegged currencies to the U.S. dollar and enabled the IMF to bridge payments imbalances. However, the system broke down in 1971 when the U.S. ended convertibility of dollars to gold, ending the Bretton Woods system.

    Copyright:

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    Download as DOCX, PDF, TXT or read online from Scribd
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    Bretton wood system:

    History:
    During the World War II from 122 July 1944 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, to attend the United Nations Monetary and Financial Conference. The purpose of this conference was to rebuild the international economic system, at the end of this conference all delegates signed the Agreement on its final day called Bretton wood system

    Purpose:
    The Bretton Woods system was an international monetary management system whose purpose was to establish the rules for commercial and financial relations among the world's major industrial states in order to govern monetary relations among them in the mid-20th century. The Bretton Woods system was the first example of a fully agreed monetary order among allied nations.

    Institutional development of Bretton wood:


    In order to set a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods had established two major organizations, I. II. International Monetary Fund (IMF) International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had approved the agreement.

    Chief features:
    The chief features of the Bretton Woods system were a responsibility for each country to adopt a monetary policy that maintained the exchange rate by attaching its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments.

    Role of IMF: Had a regulatory role, to administer the adjustable peg exchange rate among member countries. It would insure the creation of sufficient international liquidity to guard against hiccups (fluctuations) in the growth of international trade due to shortages of gold and internationally acceptable currencies. It would serve as a consultative forum to promote inters governmental corporations on international monitory issues.

    Role of World Bank: World Bank Group (WBG) basically was comprised of four institutions, I. II. III. IV. International bank foe reconstruction & development (IBRD) International Finance Corporation. (IFC) International Center for the settlement of Investment Disputes. (ICSID) The Multilateral Investment Guarantee Agency. (MIGA)

    All the institutions have a shared mandate of reducing world poverty and accelerating economic growth among member countries. Initially bank only gave loans to specific projects like for mega constructions of dam, highway etc. But in 1980 it also introduced structural adjustment program (SAP) to provide financial support to those countries trying to stabilize their economies.

    End of Bretton wood System:


    The Bretton wood system broke down after the dollar shortage turned into the dollar glut. So, on 15 August 1971, the United States unilaterally terminated convertibility of the US$ to gold and $ was allowed to float freely in the international currency market. This brought the Bretton Woods system to an end and saw the dollar become fiat currency. This action, referred to as the Nixon shock, created the situation in which the United States dollar became a reserve currency used by many states. At the same time, many fixed currencies (such as GBP, for example), also became free floating.

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