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

Author

Listed:
  • 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.

Suggested Citation

  • Michael Dooley & Peter Garber, 2005. "Is It 1958 or 1968? Three Notes on the Longevity of the Revived Bretton Woods System," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(1), pages 147-210.
  • Handle: RePEc:bin:bpeajo:v:36:y:2005:i:2005-1:p:147-210
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    References listed on IDEAS

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    Cited by:

    1. Tyers, Rod, 2015. "International effects of China's rise and transition: Neoclassical and Keynesian perspectives," Journal of Asian Economics, Elsevier, vol. 37(C), pages 1-19.
    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. Dirk Willenbockel, "undated". "Structural Effects of a Real Exchange Rate Revaluation in China: a CGE Assessment," EcoMod2006 272100102, EcoMod.
    4. Jean-Pierre Allegret & Audrey Sallenave, 2015. "The role of international reserves holding in buffering external shocks," Working Papers hal-01660235, HAL.
    5. Maurice Obstfeld, 2007. "The Renminbi fs Dollar Peg at the Crossroads," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(S1), pages 29-56, December.
    6. 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, vol. 16(1), pages 111-142, Jan-Jun.
    7. 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.
    8. 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 multivar
      ," MPRA Paper 9910, University Library of Munich, Germany.
    9. Vipin Arora & Rod Tyers & Ying Zhang, 2014. "Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving," CAMA Working Papers 2014-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    10. 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.
    11. Frankel, Jeffrey, 2006. "Global Imbalances and Low Interest Rates: An Equilibrium Model vs. A Disequilibrium Reality," Working Paper Series rwp06-035, Harvard University, John F. Kennedy School of Government.

    More about this item

    Keywords

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

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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