The Role of International Organizations in the Bretton Woods System
In: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform
This paper examines the roles played by organizations in maintaining the Bretton Woods System. Theory indicates that even if countries understand that cooperation will lead them to a Pareto superior outcome, they need not cooperate unless they are convinced that other countries are also committed to doing so. In this context international organizations can facilitate cooperation by serving as commitment mechanisms. Cooperation in the Bretton Woods System involved the maintenance of stable exchange rates and unrestricted trade among member countries. The commitment mechanisms that the Bretton Woods Institutions provided member countries included: rules of cooperation, financial resources to enable them to play by the rules, and a centralized source of information on each others' commitment to the rules. Post-war history suggests that information monitoring and sharing has been a relatively effective commitment mechanism for international organizations.
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