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Bretton‐Woods Systems, Old And New, And The Rotation Of Exchange‐Rate Regimes

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  • STEPHEN G. HALL
  • GEORGE HONDROYIANNIS
  • P. A. V. B. SWAMY
  • GEORGE S. TAVLAS

Abstract

A recent contribution to the literature argues that the present international monetary system in many ways operates like the Bretton-Woods system. Asia is the new periphery of the system and pursues an export-led development strategy. The members of the new periphery peg their currencies to the U.S. dollar at undervalued exchange rates and accumulate foreign reserves. In contrast, the old periphery - - consisting of Western Europe, Canada and parts of Latin America - - interacts with the centre with flexible exchange rates; its aggregate current account has been roughly in balance. As under the older system, the United States remains the centre country, pursuing a monetary-policy strategy that overlooks the exchange rate. An implication of this argument is the following asymmetry hypothesis: under both regimes the United States does not take external factors into account in conducting monetary policy while the periphery does take external factors into account. We provide results of a test of the asymmetry hypothesis. Then, we present a new method for decomposition of the business cycle using a time-varying-coefficient technique that allows us to test the relationship between the cycle and macroeconomic policies. We apply this technique to five countries for three sub-periods over the 1959 to 2007 period.
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Suggested Citation

  • Stephen G. Hall & George Hondroyiannis & P. A. V. B. Swamy & George S. Tavlas, 2011. "Bretton‐Woods Systems, Old And New, And The Rotation Of Exchange‐Rate Regimes," Manchester School, University of Manchester, vol. 79(2), pages 293-317, March.
  • Handle: RePEc:bla:manchs:v:79:y:2011:i:2:p:293-317
    DOI: j.1467-9957.2010.02194.x
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    File URL: http://hdl.handle.net/10.1111/j.1467-9957.2010.02194.x
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    Cited by:

    1. Hoang, Thi Hong Van & Lahiani, Amine & Heller, David, 2016. "Is gold a hedge against inflation? New evidence from a nonlinear ARDL approach," Economic Modelling, Elsevier, vol. 54(C), pages 54-66.
    2. 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.

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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