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The Debate about the Revived Bretton-Woods Regime: A Survey and Extension of the Literature

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  • Stephen Hall

    ()

  • George S. Tavlas

    ()

Abstract

This paper surveys the literature dealing with the thesis put forward by Dooley, Folkerts-Landau and Garber (DFG) that the present constellation of global exchange-rate arrangements constitutes a revived Bretton-Woods regime. DFG also argue that the revived regime will be sustainable, despite its large global imbalances. While much of the literature generated by DFG’s thesis points to specific differences between the earlier regime and revived regime that render the latter unstable, we argue that an underlying similarity between the two regimes renders the revived regime unstable. Specifically, to the extent that the present system constitutes a revived Bretton-Woods system, it is vulnerable to the same set of destabilizing forces -- including asset price bubbles and global financial crises -- that marked the latter years of the earlier regime, leading to its breakdown. We extend the Markov switching model to examine the relation between global liquidity and commodity prices. We find evidence of commodity-price bubbles in both the latter stages of the earlier Bretton-Woods regime and the revived regime.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 11/21.

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Date of creation: Mar 2011
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Handle: RePEc:lec:leecon:11/21

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Keywords: Bretton-Woods regime; international liquidity; price bubbles; Markov switching model;

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Cited by:
  1. Maurice Obstfeld, 2013. "The International Monetary System: Living with Asymmetry," NBER Chapters, in: Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, pages 301-336 National Bureau of Economic Research, Inc.

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