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The Bretton
Woods System
Putra Ramadhan
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What is
Bretton
Woods
System?
Bretton Woods System is a world economic system that resulted from the
conference held at Bretton Woods, New Hampshire in 1944. This conference is
a product of the collaboration between the United States and the United
Kingdom which has several key features that gave birth to three world financial
institutions, namely the International Monetary Fund, the World Bank, and the
World Trade Organization.
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What was The Bretton Woods System

 In 1944 representative 44 countrIes meet at Bretton Woods, New Hampshire, to design

the new International Monetary System that would facilitate the postwar economic growth

 Under the new Agreement.

1. A fix exchange rate system Was established

2. All currencies were fixed to gold. But only the U.S. Dollar was directly convertible to gold

3. Devalutation could not be used as a competitive purposes

4. A country could not devalue its currency by more than 10% without permission to IMF
approval.
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Expected Benefits From The
System

Through capital controls, the countries

pursue the full employment and stablity
(low inflation) and the eksternal balance
(Keeping exchnge rates stabLe)
simultaneously.
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Problems

 Occasional devaluations under the supervision of the IMF to

remove “Fundamental Disquilibria” in the balance of payments
(BOP)

 United State free from external economic pressures

 Countries were not willing to accept the high inflation rates

 Countries no longer based this value on gold.

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Evolution and Breakdown

 The reserves of most countries became a mixture of gold and

dollars

 In 1958, countries in Europe completed the restoration of

convertibility

 National Interest rates were closely linked with each other due to
the opportunity to move funds accros borders.

 In 1970s the balance of payment crisis were so masive that finally

countries could not keep up with the adjustments, so the system
collapsed and replaced with a regime of floating exchange rate.
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Key Actors

Harry Dexter White and John Maynard Keynes