Bretton Woods International Monetary Research Articles

THE ROLE OF THE INTERNATIONAL MONETARY FUND IN THE INTERNATIONAL MONETARY SYSTEM

The International Monetary Fund (IMF) is at the center of the international monetary system. Such a position allows this institution to influence monetary relations among all subjects that enter into such relations. The aim of this paper is to ensure a better understanding of the establishment and operation of the International Monetary Fund, as well as the structure of the International Monetary Fund and its impact on the international monetary system. In this context, the paper addresses the question of whether the International Monetary Fund has the ability to be the main actor in regulating international monetary relations. In order to provide the whole picture, this paper first analyzes the reasons for the establishment of the International Monetary Fund, its legal position and organization. In particular, the authors focus on the changing role it played within the Bretton Woods International Monetary System, and the role it plays today.

Bretton Woods After 50

ABSTRACT This paper reviews the operation of the Bretton Woods international monetary system 50 years after the United States closed the Gold Window linking the dollar to gold in August 1971. It argues that Bretton Woods operated as successfully as it did owing to three special circumstances: low international capital mobility, tight financial regulation, and the dominant economic and financial position of the United States and the dollar. There can be no more straightforward an explanation for why nothing like Bretton Woods will be restored in the foreseeable future.

The United States, China and the WTO after Coronavirus

A hegemon can destroy its international regimes, but what happens when it does not possess the capacity to reconstitute a regime to its liking? Drawing on structural power theory, our article examines President Nixon’s historic attacks on the Bretton Woods international monetary regime to help illuminate President Trump’s attacks on the World Trade Organisation (WTO). In both cases regime destruction was driven to a large extent by a desire to contain rivals: Europe for Nixon, China for Trump. Drawing on original archival material, our case study analysis shows that while the United States possessed sufficient negative structural power to derail Bretton Woods, it lacked sufficient positive structural power to create the new monetary structure Nixon wanted. Trump faces a similar dilemma: he can block the WTO regime, but cannot necessarily replace it with one to the United States’ liking. China is too powerful and possesses too much structural power of its own to give up its WTO privileges without a fight. After the Coronavirus pandemic, it is unlikely that China can prevent the United States from wrecking the WTO trade regime, but very likely it can block US attempts to create a successor regime tailored exclusively to US requirements.

A comprehensive classification of monetary policy frameworks in advanced and emerging economies

Abstract The paper presents a new classification of monetary policy frameworks that it applies to advanced and emerging economies for the period since the end of the Bretton Woods international monetary system, with a focus on the monetary authorities’ objectives (domestic and external), and on pre-announced targets and actual performance. The classification (available at www.monetaryframeworks.org) also emphasizes the underlying monetary and financial infrastructure that conditions the instruments available to the authorities and, therefore, the coherence of different frameworks. It is constructed mainly from a close reading of IMF Article IV consultation reports. The two major changes revealed by the data are the trends over time towards a heavier focus on inflation, and towards more systematic and coherent monetary arrangements.

Three Major Financial Crises: What Have We Learned

Few experts predicted the Asian Financial Crisis of 1997-1998, or the Global Financial Crisis of 2008 and its close companion the Eurozone Debt Crisis of 2010, and we certainly do not pretend to be able to predict the next one. Yet history teaches there will be another crisis and probably sooner rather than later, and, of course, in the decade since the start of the Global Financial Crisis, the Eurozone crisis has been ongoing in many of its dimensions. Fragility that periodically erupts into a full blown financial crisis appears to be an integral feature of market-based financial systems in spite of the advent of sophisticated risk management tools and regulatory systems. If anything the increased frequency of modern crises since the collapse of the Bretton Woods international monetary system and the period of financial internationalization and globalization which has followed, underscores how difficult it is to prevent and deal with systemic risk. We thus seek to compare and contrast these three major crises both to distill the lessons to be learned, and to identify what more can be done to strengthen our financial systems. The following sections will provide an overview of each crisis in turn, considering in particular (i) its causes; (ii) the effectiveness of policy responses; and (iii) the lessons. In the conclusion we seek to draw some common themes from these experiences going forward.

Perspektive međunarodnog monetarnog sistema

During the 20th century, the dollar gained the status of the world's most important currency. Therefore, the Bretton Woods International Monetary System was based on the dollar. However, in the 1970s, the situation changed significantly - demand for dollars declined, the currencies of the most important European countries became convertible, the volume of international trade increased greatly, international capital flows were liberalized, the external convertibility of the dollar to gold was abolished, and the currencies began to fluctuate. In this way, the original Bretton Woods international monetary system ceased to exist. In addition to the changes, the functioning of the international monetary system is greatly impacted by the fact that the United States recorded an increasing amount of current account deficits from year to year and, in the 1980s, moved from the position of the net creditor to that of the net debtor, that the euro was created on the soil of the EU and that China became the world's largest exporter and one of the largest (if not the largest) world economies. For this reason, the theoretical assumptions of the international monetary system are systematized in the paper, the role of other world currencies is examined, and the question of why the dollar continues to be the dominant world currency is answered.

The End of the Bretton Woods International Monetary System

This paper examines two episodes of international economic policy coordination: the efforts to modify the Bretton Woods international monetary system in the 1960s and early 1970s and to reform the system after the closing of the US official gold window on August 15, 1971. The paper examines the diagnoses of the problem in each episode, the treatments applied, and the results in the short run and longer run. In the short run, both episodes were failures. The international monetary system that emerged in the mid-1970s, while less systemic than some would like, has nevertheless stood the test of time, although proposals for its reform continue to be discussed.

The Principles and Operation of the Bretton Woods International Monetary System in the Years 1944–1971. The Reasons for Its Collapse

The subject of the article is an analysis of the role of the US dollar in the development of international trade and the world economy during the period of the Bretton Woods monetary system (1944–1971). The international monetary system existing at that time was, in principle, a gold exchange standard based mainly on the national currency of the United States. However, a relatively small role was also played by other currencies including, in particular, the pound sterling. It should be noted that the Bretton Woods rules did not match the conditions in the world economy which emerged after World War II. The main areas of criticism concerned such assumptions as the maintenance of an official fixed price for gold, or a too narrowly interpreter postulate for the stability of the exchange rate. On the other hand, it should be noted that the introduction of the stability of exchange rates and the abolition of restrictions on payments were fundamentally sound decisions. They led in fact to the minimisation of a risk inherent in international trade and its rapid growth. One should also emphasise the fact that from the very beginning, in the international gold based monetary system there was an internal contradiction (paradox), which eventually led to its collapse. This was namely the fact that the growth in world trade created a growing demand for international liquidity. This was tantamount to a necessity to maintain a permanent balance of payments deficit in respect of the country whose currency was considered the key currency. At the same time, the growing volume of the US currency resulted in an increasing crisis of confidence in the dollar.

Global Financial Reform Needed, But Unlikely

Little is known at the present time about the molecular basis and mechanisms of morphogenesis. The present study is an attempt to determine what influence the extracellular matrix has on the initial outgrowth of the limb bud. Stage -12 to -18 chick embryo lateral plates were examined in relation to proline and sulfate incorporation into collagen and proteoglycan. The flank and limbs incorporated the same amount of labeled proline and sulfate before stage 16. At stage 16 the flank began to incorporate more of both isotopes until at stage 18 there was twice as much incorporation into the flank as into the limbs. The flank and limbs contained the same type of collagen during the period examined. The limbs contained both large and small proteoglycans but the flank contained only small proteoglycans. These data suggest that the extracellular matrix in the flank and limb regions may play a role in limb outgrowth and that the limb buds at these stages may be more inclined toward cartilage development.

Towards a Case for a Second American Revolution

I. CONTEXTI think it must also be admitted that there are cases in which revolution is justifiable- Bertrand Russell, 19491.1 INTRODUCTION: A CRITICAL JUNCTUREHistorical context - As a comparatively young nation, the United States has been through many important developments since independence was first declared in 1776. Since then the colonies won a revolutionary war against Britain, ratified a new constitution, fought a civil war and abolished chattel slavery, extended its territory to the Pacific Ocean, expanded the right to vote, underwent an industrial revolution, took on corporate monopolies and political machines during the progressive-populist era, experienced the 'Roaring Twenties' followed by the Wall Street crash and the Great Depression, and fought in two World Wars before emerging as the most powerful country on earth.U.S. international relations in the decades following World War II were largely overshadowed by the Cold War. Prominent institutions during the post-war era include the Bretton Woods international agreement, the gold monetary standard, Keynesian economic policies, a mixed economy (notably in Britain) and the Glass-Steagall firewall separating commercial from investment banking. The post-war era in the United States has come to be known as the 'golden age of capitalism' characterized by egalitarian income growth coupled with high levels of financial-sector stability.However, a constellation of events in the 1970s-the breakdown of the Bretton Woods international monetary order, rising inflation and unemployment, stagnating economic growth, and two major oil shocks- set the stage for a major paradigm shift towards the era of neoliberal globalization. In theory, neoliberal ideology is characterized by the doctrine of neoclassical supply-side economics and its various policy objectives: privatization of state-owned assets and social services, liberalization of trade and finance, deregulation of business activity, the weakening of labor unions, and the minimization of macroeconomic imbalances such as inflation, debt and deficits.Early signs of the onset of neoliberalism can be found in events such as the early assault on California's system of higher education by then governor Ronald Reagan, the rise of Pinochet in Chile in 1973 and the passage of Proposition 13 in California in 1978. However, the election of British premier Margaret Thatcher in 1979 and U.S. president Ronald Reagan in 1980 set the stage for a definitive paradigm shift towards neoliberalism (Levy, Kagan & Zysman 1997; Campbell 1998; Sisson & Hartmann 2014, 220).Backed by the Washington Consensus, neoliberalism became a globally dominant economic system, especially after the fall of the Soviet Union in 1989. During the neoliberal era, the IMF and World Bank, using structural adjustment loans and abutted by various forms of U.S. intervention and diplomatic pressure, were able to pressure many developing countries to adopt neoliberal policies. Meanwhile, global competition has pressured many countries in the developed world to adopt neoliberal reforms as well, although the extent to which European and Japanese capitalism is converging on the more liberal variety practiced in the U.S. and Britain has been the subject of ongoing debate among comparative political economists.Critical juncture - The era of neoliberalism coincided with many years of economic growth in the United States and in several regions of the developing world, especially Asia. Despite this, in the United States and beyond an extensive list of policy problems (enumerated below) have become increasingly apparent. Indeed, one can reasonably posit that the United States today stands at a critical juncture in its historical development, a situation itself embedded in a larger global critical juncture. For instance, referring to the current global ecological crisis, political scientist Manfred Steger observes, Humanity has reached yet another critical juncture-the most important in the relatively short existence of our species (Steger 2013, 136). …

Growth in the International Reserves of Russia, China, and India: A Comparison of Underlying Mechanisms

A noted international specialist on the Russian economy compares the different mechanisms by which the emerging powerful economies of Russia, China, and India accumulated substantial foreign reserves during the 2000s in the lead-up to the global financial crisis. He also investigates the costs incurred by these countries of intervention into exchange markets to maintain exchange rate regimes supporting such accumulation, as well as measures undertaken after the crisis to address sudden and massive outflows of foreign private capital and considerable decreases in demand for imports in developed countries. The author argues that each of the three countries can be viewed as a prototype for a particular means of reserve accumulation among emerging market countries that has led to the revival of the Bretton Woods international monetary system.

The price of gold and the exchange rates: Once again

This paper examines the theoretical and empirical relationships between the major exchange rates and the price of gold using forecast error data. Among other things, it is found that, since the dissolution of the Bretton Woods international monetary system, floating exchange rates among the major currencies have been a major source of price instability in the world gold market and, as the world gold market now seems to be dominated by the US dollar bloc, appreciations or depreciations of that dollar would have strong effects on the price of gold in other currencies. The results of this study are rather different from those obtained in an earlier study of the same subject.

Bretton Woods 2 system and US balance of payment deficit

The author explores the evolution, functioning, similarities and differences between the original Bretton Woods international monetary system that operated from 1945 to 1973 and the present modified institution, which is symbolically called Bretton Woods 2 System. The existing international financial architecture keeps on being based on the hegemony of the US dollar, as a dominant reserve currency. However, in spite of the fact that in most cases the present international monetary system implies the regime of flexible foreign exchanges rates, a characteristic of this system is that many countries in different degrees refuse to accept the appreciation of their national currencies to the US dollar. At the same time, the domination of the USA, the most indebted country in the world, is becoming a very serious threat to its sustainability. However, as the author concludes, the creators of the international monetary system, being aware how serious could be the consequences of its cessation, endeavor to extend its operation accepting less expensive consequences of keeping it alive.

The revived Bretton Woods system

AbstractThe economic emergence of a fixed exchange rate periphery in Asia has re‐established the United States as the centre country in the Bretton Woods international monetary system. We argue that the normal evolution of the international monetary system involves the emergence of a periphery for which the development strategy is export‐led growth supported by undervalued exchange rates, capital controls and official capital outflows in the form of accumulation of reserve asset claims on the centre country. The success of this strategy in fostering economic growth allows the periphery to graduate to the centre. Financial liberalization, in turn, requires floating exchange rates among the centre countries. But there is a line of countries waiting to follow the Europe of the 1950s/60s and Asia today, sufficient to keep the system intact for the foreseeable future. Copyright © 2004 John Wiley & Sons, Ltd.

The price of gold and the exchange rate

This paper examines the theoretical relationship between the major exchange rates and the prices of internationally-traded commodities. In the empirical section, the case of gold is analyzed using forecast error data. Among other things, it is found that, since the dissolution of the Bretton Woods International monetary system, floating exchange rates among the major currencies have been a major source of price instability in the world gold market and, as the world gold market is dominated by the European currency bloc, appreciations or depreciations of European currencies have strong effects on the price of gold in other currencies.

Europe and the dollar

The recent headline-grabbing attention to European currency turmoil has tended to push transatlantic monetary relations into the background. The Bundesbank was placed centre stage and the dollar barely noticed. Yet, the dollar is still the world's most important currency. For much of the twentieth century its exchange value has exerted a potent, sometimes a decisive, influence on the economic choices open to European governments. In explaining the collapse of international monetary order in the 1970s and the retreats from liberal trade policies, some American writers have stressed the relative decline of American hegemonic power. It was this power, they argue, that created and upheld the Bretton Woods international monetary system and the liberal trade thrust of the General Agreement on Tariffs and Trade (GATT). The rise of other major economic powers, like Germany and Japan, inevitably diffused and weakened the central leadership role of the United States. History, they add, shows that without hegemonic leadership international economic relations degenerate into a beggar-my-neighbour striving for national selfadvancement, as in the 1930s. Some uncanny parallels with the inter-war period are clearly discernible in the current disorders of the world economy. But before turning to them, I would like to make two points about the American hegemony thesis. Firstly, the argument looks outside, not inside, the United States for an explanation of the relative decline of American economic leadership. It overlooks or downplays the internal sources of weakness such as the poor performance of the American economy and its gross mismanagement by successive administrations. Secondly, the thesis is concerned with relational power, whereas the international role of the dollar is a form of structural power. Whatever developments and policies affect its exchange value will necessarily oblige foreign governments to respond. The dollar has the ability to extend or restrict the range of options open to others. General de Gaulle saw this clearly, tried to counterattack but was defeated by an outbreak of disorder at home. Shortly afterwards,

France and the Breakdown of the Bretton Woods International Monetary System

France and the Breakdown of the Bretton Woods International Monetary System

France and the Breakdown of the Bretton Woods International Monetary System

France and the Breakdown of the Bretton Woods International Monetary System

Air fares and exchange rates

The Bretton Woods international monetary system, with fixed-parity rates of exchange, ended in March 1973. The author examines the problems airlines and tour companies have faced since then in adjusting their tariffs for value fluctuations in floating currencies. Many airlines favour the use of the International Monetary Fund's Special Drawing Right as an international unit of account, but there are unresolved difficulties in applying this worldwide. Currency problems have been particularly troublesome within Europe, where adoption of the new European Currency Unit might provide a solution.

Problems of the International Monetary System and Proposals for Reform—1944-70

Recent international economic events and government pronouncements have focused renewed attention on the future of the Bretton Woods international monetary system. What is the system now? What would we like it to be in the future?