2. Bretton Woods System: 1945–1972
• Signing of Articles of Agreement of the
International Monetary Fund (IMF).
• Creation of sister institution i.e. The
international Bank of Reconstruction and
Development (IBRD), better known as the
World Bank.
Sarjeevan Sainbhi 2
3. Bretton Woods System: 1945–1972
• Design of the Gold-Exchange System
British German French
Pound Mark Franc
Par value
U.S. Dollar
Pegged at $35/oz.
Gold
Sarjeevan Sainbhi 3
4. Bretton Woods System: 1945–1972
• Triffin Paradox
• Special Drawing Rights (SDRs) – “Portfolio” of
currencies.
• Smithsonian Agreement : G-10.
Sarjeevan Sainbhi 4
5. The Flexible Exchange Rate Regime:
1973-Present
• Followed the Demise of the Bretton Woods
system.
• Jamaica Agreement
• Plaza Accord: G-5
• Louvre Accord: G-7
Sarjeevan Sainbhi 5
6. Fixed vs. Flexible Exchange rate
regime
• Key feature of flexible exchange rates:
– Easier external Adjustments
– National Policy Autonomy
• Drawback: Exchange rate uncertainty may
hamper international trade & investment.
Sarjeevan Sainbhi 6
7. Ideal International Monetary system
• Liquidity
• Adjustment
• Confidence
“IMS should be able to provide the world
economy with sufficient monetary reserves to
support the growth of international trade and
investment”
Sarjeevan Sainbhi 7