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The Gold Standard, Bretton Woods and other Monetary Regimes: An Historical Appraisal

  • Michael Bordo

This paper provides answers to two questions. The first question is which international monetary regime is best for economic performance? One based on fixed exchange rates: including the gold standard and its variants? Adjustable peg regimes such as the Bretton Woods system and the European Monetary System? Or one based on floating exchange rates? The second question is why have some monetary regimes been more successful than others? Specifically. why did the classical gold standard last close to a century (at least for Great Britain) and why did Bretton Woods only endure for twenty-five years (or less)? Why was the European Monetary System successful for only a few years? To answer the first question I examine empirical evidence on the performance of three monetary regimes: the classical gold standard; Bretton Woods; and the current float; and as a backdrop the mixed regime interwar period. 1 answer the second question by linking regime success to the presence of credible commitment mechanisms, that is to the incentive compatibility features of the regime. Successful fixed rate regimes. in addition to being based on simple transparent rules. contained features which encouraged a center country to enforce the rules and other countries to comply.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4310.

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Date of creation: Apr 1993
Date of revision:
Publication status: published as Federal Reserve Bank of St. Louis Review, Vol. 75, No. 2, pp. 123-191,(March/April 1993).
Handle: RePEc:nbr:nberwo:4310
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  2. Baxter, M. & Stockman, A.C., 1988. "Business Cycles And The Exchange Rate System: Some International Evidence," RCER Working Papers 140, University of Rochester - Center for Economic Research (RCER).
  3. Alogoskoufis, George S & Smith, Ron, 1991. "The Phillips Curve, the Persistence of Inflation, and the Lucas Critique: Evidence from Exchange-Rate Regimes," American Economic Review, American Economic Association, vol. 81(5), pages 1254-75, December.
  4. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 377-400, May.
  5. Barsky, Robert B., 1987. "The Fisher hypothesis and the forecastability and persistence of inflation," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 3-24, January.
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