The paper 'Important Features of the Bretton Woods Agreement" is an outstanding example of a macro and microeconomics case study. The Bretton Woods system refers to an international monetary structure of fixed exchange rates that was initiated by Britain and the United States in 1944. It is widely understood to denote the global monetary system that existed from the Second World War to 1970s (Eichengreen, 1995). The arrangement represented the world’ s first-ever wholly negotiated monetary system whose design was intended to regulate currency relations of independent states. It integrated bilateral decision making with binding legal obligations enabled through the IMF, which had supernatural authority.
In principle, the subsequent effectiveness and the ultimate disintegration of the Bretton Woods Agreement directly relied on the policies and influences of its most powerful member state, the United States (Calleo and Rowland, 1973). This paper describes the most influential features of the Bretton Woods Agreement and the reasons underlying its eventual disintegration. Bretton Woods Agreement: Features The Bretton Woods system refers to a global monetary structure of fixed exchange rates that was initiated by Britain and the United States after World War II.
It came about when nations sought to revitalize the gold standard after World War I, although it collapsed completely in the course of the Great Depression of the 1930s (Cohen, n.d. ). In 1944, delegates of the leading industrial nations later met in Bretton Woods in New Hampshire to formulate a global monetary system (Bloch, 1977). Bretton Woods system established the financial and commercial regulations among the top industrialized nations in the mid-20th century. As a landmark monetary management system, it was the foremost example of a fully-fledged negotiated monetary order that was designed to regulate monetary relations amongst the world’ s sovereign states.
Indeed, a number of regulatory systems, procedures and institutions aimed at regulating the global monetary system were borne out of the Bretton Woods (Markwell, 2006). For instance, the International Bank of Reconstruction and Development (IBRD) and the International Monetary Fund (IMF) were established by policymakers at the Bretton Woods became immediately operational in 1945 following the ratification of the agreement by a number of countries (Eichengreen, 1996). The primary attributes of the Bretton Woods System included the requirement that each country had an obligation to implement a monetary system that would maintain the exchange rate by relating its currency to that of the United States dollar as well as IMF’ s ability to close the momentary imbalance of payments (Van, 1978). As set out by the Bretton Woods System, each country’ s central bank, aside from the United States, was charged with upholding fixed exchange rates between the dollar and their respective currencies.
To ensure this, each country had to mediate in foreign exchange markets. In case a country had a currency that was relatively higher than the U. S.
dollar, its central bank would sell off its currency in return for the U. S. dollars, thus pulling down the value of its currency. On the other hand, if the value of the money held by a particular country was relatively lower than the U. S. dollar, then the country would have to purchase its own currency, thus shovelling up the price.
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