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Money in the Western Legal TraditionMiddle Ages to Bretton Woods$
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David Fox and Wolfgang Ernst

Print publication date: 2016

Print ISBN-13: 9780198704744

Published to Oxford Scholarship Online: April 2016

DOI: 10.1093/acprof:oso/9780198704744.001.0001

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The Bretton Woods System

The Bretton Woods System

Design and Operation

Chapter:
(p.611) 28 The Bretton Woods System
Source:
Money in the Western Legal Tradition
Author(s):

Peter Kugler

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198704744.003.0028

The System designed at the conference at Bretton Woods in July 1944 (BWS) was the first full attempt to establish an international monetary system with fixed but adjustable exchange rates based on an international treaty. The International Monetary Fund (IMF) was created for financing temporary deficits, and its members were obligated to fix their exchange rates and refrain from any restrictions on current international transactions but were allowed capital controls. The system was short-lived and collapsed in 1971. The possibility of exchange rate adjustment led to speculative capital flows which were not successfully controlled. In addition, the fixed link of the US dollar to gold with a falling real price of gold—led to substitution of gold for US dollars in international reserve and a convergence towards a dollar standard. This privileged role of the dollar and its use as an instrument for financing the Vietnam war was no longer accepted by economically successful countries in Western Europe and Japan.

Keywords:   Bretton Woods System, international monetary system, fixed exchange rates, International Monetary Fund, convertibility, capital controls, dollar standard

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