lec_12_110B

Lec_12_110B - Economics 110B World Economic History II Spring 2008 University of California Davis Lecture 11 The Bretton Woods System Today’s

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Economics 110B World Economic History II Spring 2008 University of California, Davis Lecture 11: The Bretton Woods System
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Today’s Program What is Bretton Woods? World Bank (IBRD), International Monetary Fund, ITO now WTO The Intellectual Origins of the Bretton Woods Institutions The International Economic Environment Post World War II The US and UK shape the Bretton Woods institutions Weaknesses: The United States at the center of Bretton Woods Balance of Payments, Capital Controls and Capital Flows The Demise of Bretton Woods and the ‘gold standard’
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Readings Cameron and Neal Ch.14, pp, 362-371 If you want a reading I suggest chapter 4 of Barry Eichengreen’s Globalizaing Capital. This lecture will follow that chapter closely.
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Why do we care about Bretton Woods? A conscious coordinated attempt to regain the international stability of the 19 th century and achieve prosperity. Today we have a world with China and the US which is called Bretton Woods II Many activists cite the IMF and World Bank as the reason countries stay poor. To understand that international economic agreements may be likely to last when other geo-political commitments are supportive.
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Economics you need to know Balance of payments identities How deficits (fiscal and private) lead to current account deficits Balance of payments deficit = loss of reserves or a capital inflow (i.e. a rise in debt) A surplus is a gain in reserves or a capital outflow (country adds to its international assets) Why trade deficit countries need loans. What the exchange rate is The issues of the Trilemma
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Interwar period: Review There was a lost faith in the market Destabilizing and speculative capital flows were blamed for instability Exchange rate depreciations had been competitive and beggar-thy-neighbor Cooperation was lacking in the international system Debtors had to ‘bear the burden’ of adjustment
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Planning for the Post-War Britain and the US had already been planning as of 1941 Post-War Agreement hammered out by 1943 ratified in Bretton Woods, New Hampshire at the Mount Washington Resort 1944. BW comes into full operation in the late 1950s.
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The Goals of US-UK Compromise for International Stabilization Fund Balance of international integration and national policy independence Provide more cooperation Ease adjustment of the balance of payments deficits (to avoid deflationary policies) Avoid destabilizing capital flows International watchdog to sanction countries that destabilized the system with depreciations
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How the System differed from the Gold Exchange Standard Fixed but adjustable exchange rates in
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This note was uploaded on 08/18/2008 for the course ECON 111B taught by Professor Meissner during the Spring '08 term at UC Davis.

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Lec_12_110B - Economics 110B World Economic History II Spring 2008 University of California Davis Lecture 11 The Bretton Woods System Today’s

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