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Global Imbalances and the Lessons of Bretton Woods

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Author Info
Barry Eichengreen

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Abstract

An influential school of thought views the current international monetary and financial system as Bretton Woods reborn. Today, like 40 years ago, the international monetary system is composed of a core, which has the exorbitant privilege of issuing the currency used as international reserves, and a periphery, which is committed to export led growth based on the maintenance of an undervalued exchange rate. Then as now there is the same old core, the United States, but a new periphery, Asia. This view suggests that the current pattern of international settlements can be maintained indefinitely. In particular, there is no reason why the dollar must fall, since there is no need for balance of payments adjustment, and since the Asian countries will resist appreciation of their currencies of the greenback. In this paper I argue that this image of a new Bretton Woods System confuses the incentives that confront individual countries with those that confront groups of countries. It also overlooks important ways in which the world has changed since 1960. This alternative model suggests that if there indeed exists something resembling the Bretton Woods System, it does not have long to run.

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File URL: http://www.cepii.fr/anglaisgraph/publications/economieinter/rev100/rev100c.htm
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Article provided by CEPII research center in its journal Economie Internationale.

Volume (Year): (2004)
Issue (Month): 4Q ()
Pages: 39-50
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Handle: RePEc:cii:cepiei:2004-4qc

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Related research
Keywords: Exchange rates; balance of payments; Bretton Woods; current accounts; system of payments;

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Find related papers by JEL classification:
F0 - International Economics - - General
F3 - International Economics - - International Finance

References listed on IDEAS
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  1. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313. [Downloadable!]
  2. 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. [Downloadable!]
  3. 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. [Downloadable!]
    Other versions:
  4. Eichengreen, Barry, 2004. "Chinese Currency Controversies," CEPR Discussion Papers 4375, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Allan H. Meltzer, 1991. "U.S. policy in the Bretton Woods era," Review, Federal Reserve Bank of St. Louis, issue May, pages 54-83. [Downloadable!]
  6. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003. "An Essay on the Revived Bretton Woods System," NBER Working Papers 9971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. 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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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael D. Bordo, 2006. "Globalization and imbalances in historical perspective," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Jan. [Downloadable!]
  2. Michael D. Bordo, 2005. "Historical Perspective on Global Imbalances," NBER Working Papers 11383, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Philip R. Lane & Sergio L. Schmukler, 2006. "The international financial integration of China and India," Proceedings, Federal Reserve Bank of San Francisco, issue Jun. [Downloadable!]
    Other versions:
  4. Hamid Faruqee & Douglas Laxton & Dirk Muir & Paolo Pesenti, 2006. "Would Protectionism Defuse Global Imbalances and Spur Economic Activity? A Scenario Analysis," NBER Working Papers 12704, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Morris Goldstein & Nicholas R. Lardy, 2005. "China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity," Peterson Institute Working Paper Series WP05-2, Peterson Institute for International Economics. [Downloadable!]
  6. Meissner, C.M. & Oomes, N., 2006. "Why Do Countries Peg the Way They Peg? The Determinants of Anchor Currency Choice," Cambridge Working Papers in Economics 0643, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  7. Herrmann, Sabine & Winkler, Adalbert, 2008. "Financial markets and the current account: emerging Europe versus emerging Asia," Discussion Paper Series 1: Economic Studies 2008,05, Deutsche Bundesbank, Research Centre. [Downloadable!]
  8. Paul Wachtel, 2006. "Understanding the Old and New Bretton Woods," Working Papers 06-20, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  9. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Pietro Alessandrini & Michele Fratianni, 2007. "Resurrecting Keynes to Revamp the International Monetary System," Working Papers 2007-19, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
    Other versions:
  11. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and The Exorbitant Privilege," CEPR Discussion Papers 5220, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. C. Randall Henning, 2007. "Congress, Treasury, and the Accountability of Exchange Rate Policy: How the 1988 Trade Act Should Be Reformed," Peterson Institute Working Paper Series WP07-08, Peterson Institute for International Economics. [Downloadable!]
  13. Christian Dreger & Eric Girardin, 2007. "Does the Nominal Exchange Rate Regime Affect the Long Run Properties of Real Exchange Rates?," Discussion Papers of DIW Berlin 746, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  14. Barry Eichengreen, 2008. "Should there be a coordinated response to the problem of global imbalances? Can there be one?," Working Papers 69, United Nations, Department of Economics and Social Affairs. [Downloadable!]
  15. Barry Eichengreen, 2005. "Sterling's Past, Dollar's Future: Historical Perspectives on Reserve Currency Competition," NBER Working Papers 11336, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Piffaretti, Nadia F., 2008. "Reshaping the International Monetary Architecture and Addressing Global Imbalances: Lessons from the Keynes Plan," MPRA Paper 12165, University Library of Munich, Germany. [Downloadable!]
  17. Giulio Cifarelli & Giovanna Paladino, 2009. "The Buffer Stock Model Redux? An Analysis of the Dynamics of Foreign Reserve Accumulation," Open Economies Review, Springer, vol. 20(4), pages 525-543, September. [Downloadable!] (restricted)
    Other versions:
  18. Piffaretti, Nadia F., 2009. "Reshaping the international monetary architecture : lessons from Keynes'plan," Policy Research Working Paper Series 5034, The World Bank. [Downloadable!]
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