Reference no: EM132807311
In view of an unstable exchange regime, leading nations made several attempts to foster an orderly international monetary system. Established in 1944 and named after the New Hampshire town where the agreements were drawn up, the Bretton Woods system created an international basis for exchanging one currency for another. It also led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development, now known as the World Bank. The former was designed to monitor exchange rates and lend reserve currencies to nations with trade deficits, the latter to provide underdeveloped nations with needed capital-although each institution's role has changed over time. Each of the 44 nations who joined the discussions at Bretton Woods contributed a membership fee, of sorts, to fund these institutions; the amount of each contribution designated a country's economic ability and dictated its number of votes. The Bretton Woods system was history's first example of a fully negotiated monetary order intended to govern currency relations among sovereign states. With the collapse of the Bretton Woods system, six industrialised democracies comprising the United States, France, Great Britain, Germany, Japan and Italy met at Rambouillet, France in November 1975 to suggest guidelines for the exchange rate system that could be acceptable to all the member nations. The Rambouillet declaration envisages closer international cooperation and constructive dialogue among all countries, transcending differences in stages of economic development and degrees of resource endowment.
Questions
Comment on the proposition that the Bretton Woods system was programmed to an eventual demise.
There are arguments for and against the alternative exchange rate regimes.
List the advantages of the flexible exchange rate regime.
Criticize the flexible exchange rate regime from the viewpoint of the proponents of the fixed exchange rate regime.
Rebut the above criticism from the viewpoint of the proponents of the flexible exchange rate regime.