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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

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

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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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
Date of revision:
Publication status: published as Dooley, Michael P., David Folkerts-Landau, and Peter Garber. "The Revived Bretton Woods System." International Journal of Finance and Economics (John Wiley & Sons Ltd.) 9(4): 307-313, October 2004
Handle: RePEc:nbr:nberwo:10332
Note: IFM
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  1. Martin Feldstein, 1999. "Self-Protection for Emerging Market Economies," NBER Working Papers 6907, National Bureau of Economic Research, Inc.
  2. 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.
  3. Barry Eichengreen, 2005. "Global imbalances and the lessons of Bretton Woods," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  4. 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.
  5. 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.
  6. 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.
  7. G Alogoskoufis & R Portes & H Rey, 1998. "The Emergence of the Euro as an International Currency," CEP Discussion Papers dp0388, Centre for Economic Performance, LSE.
  8. 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.
  9. 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.
  10. Eichengreen, Barry, 1998. "The Euro as a Reserve Currency," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 483-506, December.
  11. 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.).
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