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The Operation and Demise of the Bretton Woods System; 1958 to 1971

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  • Michael D. Bordo
Abstract
This chapter revisits the history of the origins, operation and demise of the Bretton Woods International Monetary System. The Bretton Woods system was created by the 1944 Articles of Agreement to design a new international monetary order for the post war at a global conference organized by the US Treasury at the Mount Washington Hotel in Bretton Woods, New Hampshire at the height of World War II. The Articles represented a compromise between the American plan of Harry Dexter White and the British plan of John Maynard Keynes. The compromise created an adjustable peg system based on the US dollar convertible into gold at $35 per ounce along with capital controls. It was designed to combine the advantages of fixed exchange rates of the pre-World War I gold standard with some flexibility to handle large real shocks. The compromise gave members both exchange rate stability and the independence for their monetary authorities to maintain full employment.

Suggested Citation

  • Michael D. Bordo, 2016. "The Operation and Demise of the Bretton Woods System; 1958 to 1971," Economics Working Papers 16116, Hoover Institution, Stanford University.
    • Handle: RePEc:hoo:wpaper:16116
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    References listed on IDEAS

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    1. Owen F. Humpage & Sanchita Mukherjee, 2013. "Even keel and the Great Inflation," Working Papers (Old Series) 1315, Federal Reserve Bank of Cleveland.
    2. Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234, Elsevier.
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    6. Peter M. Garber, 1993. "The Collapse of the Bretton Woods Fixed Exchange Rate System," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 461-494, National Bureau of Economic Research, Inc.
    7. Michael D. Bordo & Barry Eichengreen, 1998. "Implications of the Great Depression for the Development of the International Monetary System," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 403-454, National Bureau of Economic Research, Inc.
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    9. Robert N. McCauley & Catherine R. Schenk, 2015. "Reforming the International Monetary System in the 1970s and 2000s: Would a Special Drawing Right Substitution Account Have Worked?," International Finance, Wiley Blackwell, vol. 18(2), pages 187-206, June.
    10. Michael D. Bordo & Barry Eichengreen, 1993. "A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform," NBER Books, National Bureau of Economic Research, Inc, number bord93-1.
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    1. Bordo, Michael & Monnet, Eric & Naef, Alain, 2019. "The Gold Pool (1961–1968) and the Fall of the Bretton Woods System: Lessons for Central Bank Cooperation," The Journal of Economic History, Cambridge University Press, vol. 79(4), pages 1027-1059, December.
    2. Iqbal, Javed & Mahmood, Fatima & Nosheen, Misbah & Wohar, Mark, 2023. "The asymmetric impact of exchange rate misalignment on economic growth of India: An application of Hodrick–Prescott filter technique," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 809-823.
    3. Qin, Meng & Su, Chi-Wei & Tao, Ran & Umar, Muhammad, 2020. "Is factionalism a push for gold price?," Resources Policy, Elsevier, vol. 67(C).
    4. Alogoskoufis, George & Gravas, Konstantinos & Jacque, Laurent, 2023. "Asymmetries in post-war monetary arrangements in Europe: From Bretton Woods to the Euro Area," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    5. Michael D. Bordo, 2018. "The Imbalances of the Bretton Woods System 1965 to 1973: U.S. Inflation, The Elephant in the Room," NBER Working Papers 25409, National Bureau of Economic Research, Inc.
    6. Michael D. Bordo, 2020. "The Imbalances of the Bretton Woods System 1965 to 1973: U.S. Inflation, the Elephant in the Room," Open Economies Review, Springer, vol. 31(1), pages 195-211, February.

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    JEL classification:

    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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