The Fallacy of the Revised Bretton Woods Hypothesis: Why Today’s System is Unsustainable and Suggestions for a Replacement
AbstractDooley et al. (2003) have argued that today’s international financial system has structural similarities with the earlier Bretton Woods (1946 – 71) arrangements and is stable. This paper argues that the comparison is misplaced and ignores fundamental microeconomic differences, and that today’s system is also vulnerable to a crash. Eichengreen (2004) and Goldstein and Lardy (2005) have also argued that the system is unsustainable. However, their focus is the sustainability of financing to cover the U.S. trade deficit, whereas the current paper focuses on inadequacies on the system’s demand side. The paper concludes with suggestions for a global system of managed exchange rates that should replace the current system – hopefully, before it crashes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp114.
Date of creation: 2006
Date of revision:
Revised Bretton Woods; export-led growth; aggregate demand;
Find related papers by JEL classification:
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-07 (All new papers)
- NEP-CBA-2006-05-08 (Central Banking)
- NEP-FMK-2006-05-24 (Financial Markets)
- NEP-PKE-2006-05-31 (Post Keynesian Economics)
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.:
- 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.
- C. Fred Bergsten & Olivier Davanne & Pierre Jacquet, 1999. "The Case for Joint Management of Exchange Rate Flexibility," Working Paper Series wp99-9, Peterson Institute for International Economics.
- Thomas I. Palley, 2005. "External Contradictions of the Chinese Development Model: Export-led Growth and the Dangers of Global Economic Contraction," Working Papers wp101, Political Economy Research Institute, University of Massachusetts at Amherst.
- Thomas I. Palley, 2011. "Explaining Global Financial Imbalances: A Critique of the Saving Glut and Reserve Currency Hypotheses," IMK Working Paper 13-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- Thomas I. Palley, 2013. "Global imbalances and the Revised Bretton Woods hypothesis: Wrong before the crisis and wrong after," IMK Working Paper 108-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Judy Fogg).
If references are entirely missing, you can add them using this form.