Chapter 16-17 Notes - Chapter 16-17 ECON 3110 Bretton Woods...

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Chapter 16-17 ECON 3110
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Bretton Woods Post WW-I era showed that the Gold Standard can not be restored. WW-II showed that economic and political isolationism threaten global peace Bretton Woods Monetary Conference was an attempt to create a global monetary system that will make international economic integration easier. Keynes argued for recognition of national economic sovereignty in a new international monetary system Adjustable Exchange Rate Pegs White argued for a global currency IMF Voting rights in the IMF is proportional to the capital contribution of countries to the fund, which was proportionate to the size of their economies The country with the biggest economy (U.S.) has the largest voting right. Other Institutions that emerged from Bretton Woods: World Bank and GATT
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Similarities with the Gold Standard In theory: Every country central bank would intervene to peg their currencies In practice: Every country except the U.S. pegged their currencies with respect to the U.S. dollar. U.S. dollar was the new gold!
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How It Worked Countries intervene to keep their exchange rate within 1% of the dollar peg. U.S. doesn’t intervene but commit to converting dollars to gold at $35/oz. Pegs are only adjusted if IMF approves. Free convertibility of currencies
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Two Different Stories 1950s were a success story for the Bretton Woods system.
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