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Is It 1958 or 1968? Three Notes on the Longevity of the Revived Bretton Woods System

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  • Michael Dooley

    (University of California, Santa Cruz)

  • Peter Garber

    (Deutsche Bank)

Abstract

This paper examines the durability of what we have elsewhere called the Revived Bretton Woods system. We show that the recent behavior of long-term interest rates is consistent with market expectations that the system will last for a considerable period. We also show that emerging economies with chronic current account surpluses have not experienced the financial crises that many have predicted will trigger the system’s breakdown. Unusually long episodes of current account surpluses and reserve accumulations have been followed by real depreciation and capital gains on reserves, with little or no disruption of economic activity. We argue that, under the original Bretton Woods system, the definition of the balance of payments considered relevant was based on the assumption that collateral, not trust, supports international capital flows. We view the current system as likewise supported by collateral, in the form of goods already produced and delivered to the United States.

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Bibliographic Info

Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 36 (2005)
Issue (Month): 1 ()
Pages: 147-210

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Handle: RePEc:bin:bpeajo:v:36:y:2005:i:2005-1:p:147-210

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Keywords: macroeconomics; 1958; 1968; Longevity; Revived Bretton Woods System;

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Cited by:
  1. Frankel, Jeffrey, 2006. "Global Imbalances and Low Interest Rates: An Equilibrium Model vs. A Disequilibrium Reality," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp06-035, Harvard University, John F. Kennedy School of Government.
  2. Papaioannou, Elias & Portes, Richard & Siourounis, Gregorios, 2006. "Optimal currency shares in international reserves: The impact of the euro and the prospects for the dollar," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 508-547, December.
  3. Maurice Obstfeld, 2007. "The Renminbifs Dollar Peg at the Crossroads," IMES Discussion Paper Series, Institute for Monetary and Economic Studies, Bank of Japan 07-E-11, Institute for Monetary and Economic Studies, Bank of Japan.
  4. Barry Eichengreen, 2008. "Should there be a coordinated response to the problem of global imbalances? Can there be one?," Working Papers, United Nations, Department of Economics and Social Affairs 69, United Nations, Department of Economics and Social Affairs.
  5. Bastourre, Diego, 2008. "Cambio fundamental o especulación financiera en los mercados de commodities? Un modelo con ajuste no lineal al equilibrio
    [Structural break or financial speculation in commodity markets? A multiva
    ," MPRA Paper 9910, University Library of Munich, Germany.
  6. Vipin Arora & Rod Tyers & Ying Zhang, 2014. "Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2014-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  7. Willenbockel, Dirk, 2006. "Structural Effects of a Real Exchange Rate Revaluation in China: A CGE Assessment," MPRA Paper 920, University Library of Munich, Germany.
  8. Diego Bastourre, 2008. "Inversores Financieros en los Mercados de Commodities: Un Modelo con Dinámica de Ajuste no Lineal al Equilibrio," Department of Economics, Working Papers 072, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
  9. Rubina Hassan, 2011. "The Reserve Equation and the Analytics of Pakistan’s Monetary Policy," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, Department of Economics, The Lahore School of Economics, vol. 16(1), pages 111-142, Jan-Jun.
  10. Rod Tyers, 2014. "International Effects of China’s Rise and Transition: Neoclassical and Keynesian Perspectives," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2014-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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