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The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries

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  • Michael P. Dooley
  • David Folkerts-Landau
  • Peter Garber

Abstract

In this paper we explore some implications of the revived' Bretton Woods system for exchange market intervention and reserve management in periphery countries. Financial policies in these countries are seen as a component of a more general portfolio management policy in which the formation of an efficient domestic capital stock is a key objective. Because intervention in financial markets is an important part of their development strategy, intervention in exchange and financial markets has, and we argue will continue to be, large and persistent enough to generate predictable deviations of exchange rates and relative yields in industrial country financial markets from normal cyclical patterns. We argue that management of the currency composition of international reserves by emerging market governments and central banks is unlikely to alter these conclusions.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10332.

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Date of creation: Mar 2004
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Handle: RePEc:nbr:nberwo:10332

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  1. Richard Portes & Hélène Rey, 1998. "The emergence of the euro as an international currency," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 305-343, 04.
  2. Barry Eichengreen, 2005. "Global imbalances and the lessons of Bretton Woods," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  3. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  4. Michael P. Dooley & J. Saul Lizondo & Donald J. Mathieson, 1989. "The Currency Composition of Foreign Exchange Reserves," IMF Staff Papers, Palgrave Macmillan, vol. 36(2), pages 385-434, June.
  5. Barry Eichengreen and Jeffrey A. Frankel., 1996. "On the SDR: Reserve Currencies and the Future of the International Monetary System," Center for International and Development Economics Research (CIDER) Working Papers C96-068, University of California at Berkeley.
  6. Michael P. Dooley, 1976. "Note on key currency intervention systems," International Finance Discussion Papers 79, Board of Governors of the Federal Reserve System (U.S.).
  7. Martin Feldstein, 1999. "Self-Protection for Emerging Market Economies," NBER Working Papers 6907, National Bureau of Economic Research, Inc.
  8. Michael D. Bordo & Barry Eichengreen, 1998. "The Rise and Fall of a Barbarous Relic: The Role of Gold in the International Monetary SYstem," NBER Working Papers 6436, National Bureau of Economic Research, Inc.
  9. Joshua Aizenman & Nancy P. Marion, 2002. "The high demand for international reserves in the Far East: what's going on?," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
  10. Barry J. Eichengreen & Donald J. Mathieson, 2000. "The Currency Composition of Foreign Exchange Reserves - Retrospect and Prospect," IMF Working Papers 00/131, International Monetary Fund.
  11. Eichengreen, Barry, 1998. "The Euro as a Reserve Currency," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 483-506, December.
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  1. The US is â??Taking on Chinaâ?
    by Mario Rizzo in Think Markets on 2010-05-02 22:49:28
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Cited by:
  1. Hwee Kwan Chow & Peter N. Kriz & Roberto S. Mariano & Augustine H. H. Tan, 2007. "Financial Liberalization and Monetary Policy Cooperation in East Asia1," Finance Working Papers 21916, East Asian Bureau of Economic Research.
  2. Morris Goldstein & Nicholas R. Lardy, 2005. "China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity," Working Paper Series WP05-2, Peterson Institute for International Economics.
  3. Wenli Cheng & Dingsheng Zhang, 2011. "The "Exorbitant Privilege": A Theoretical Exposition," CEMA Working Papers 435, China Economics and Management Academy, Central University of Finance and Economics.
  4. Andrew Hughes Hallett & Juan Carlos Martinez Oliva, 2011. "Global Imbalances in a World of Inflexible Real Exchange Rates and Capital Controls," Finance Working Papers 23206, East Asian Bureau of Economic Research.
  5. Andreas Steiner, 2013. "A Tale of Two Deficits: Public Budget Balance of Reserve Currency Countries," Working Papers 97, Institute of Empirical Economic Research.
  6. Cheng, Wenli & Zhang, Dingsheng, 2012. "A monetary model of China–US trade relations," Economic Modelling, Elsevier, vol. 29(2), pages 233-238.
  7. Francis E. Warnock & Veronica C. Warnock, 2005. "International capital flows and U.S. interest rates," International Finance Discussion Papers 840, Board of Governors of the Federal Reserve System (U.S.).
  8. Francis E. Warnock & Veronica Cacdac Warnock, 2006. "International Capital Flows and U.S. Interest Rates," NBER Working Papers 12560, National Bureau of Economic Research, Inc.
  9. Heng, Dyna, 2011. "Does financial development reduce the motivation to hoard foreign reserves?," MPRA Paper 48555, University Library of Munich, Germany, revised 2012.
  10. Boysen-Hogrefe, Jens & Gern, Klaus-Jürgen & Jannsen, Nils, 2009. "Will global imbalances decrease or even increase?," Open Access Publications from Kiel Institute for the World Economy 32967, Kiel Institute for the World Economy (IfW).
  11. Nouriel Roubini, 2006. "The BW 2 regime: an unstable disequilibrium bound to unravel," International Economics and Economic Policy, Springer, vol. 3(3), pages 303-332, December.
  12. Francis E. Warnock & Veronica C. Warnock, 2005. "International Capital Flows and U.S. Interest Rates," The Institute for International Integration Studies Discussion Paper Series iiisdp103, IIIS.
  13. Nouriel Roubini & Brad Setser, 2005. "The Sustainability of the US External Imbalances," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 6(1), pages 08-15, 04.
  14. Sebastian Edwards, 2005. "Is the U.S. Current Account Deficit Sustainable? And If Not, How Costly is Adjustment Likely To Be?," NBER Working Papers 11541, National Bureau of Economic Research, Inc.
  15. Dariusz Urban, 2011. "Macroeconomic Considerations and Motives of Sovereign Wealth Funds Activity," Contemporary Economics, University of Finance and Management in Warsaw, vol. 5(2), June.
  16. Edwin M. Truman, 2005. "Postponing Global Adjustment: An Analysis of the Pending Adjustment of Global Imbalances," Working Paper Series WP05-6, Peterson Institute for International Economics.
  17. Nouriel Roubini & Brad Setser, 2005. "Will the Bretton Woods 2 regime unravel soon? the risk of a hard landing in 2005-2006," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.

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